China's Personal Income Tax Reform

The law of Individual Income Tax (IIT), firstly adopted by Britain in 1799, has become an important measure for national financial income, equal distribution on social treasure and adjustment on national economy, since its development over two centuries.It is also one of the main taxes in many countries. Up to now, the law of IIT has been established in more than 140 countries all over the world.However, the law of IIT in china had not been established until 1994. More and more problems on IIT have appeared after the economy globalized. New law on IIT is urgently required for the improvement of the economy in China because of the drastical enhancement of personal income level and diversification on Individual income.In this thesis, the basic theories on the current law of IIT are discussed by using the knowledge of Finance and Economics. Furthermore, the main problems, existing in current law of IIT, and the difference between the law of IIT in China and western countries are shown by data comparison and analysis where the samples and criterions are used. Finally, based on successful experience in western countries,a new proposal on the reform and improvement of the IIT system with current situation in China is discussed.The thesis is presented as five chapters on the research of reforming and perfecting the law system of IIT in China.In Chapterl, the basic theories on IIT are discussed. As an important method on the management of the economy, IIT has a deep effect on both macroeconomic and microeconomic scales. All the theories discussed in this chapter will be the basis for further study on the improvement and reform of the IIT system.In Chapter2, the main problems, existing in present IIT system in China, have been discussed, such as the unreasonable form of tax system, the absurdity standard of the expense deduction, the complicated form of tax rate, the unfair tax burden,the imperfect tax system and the old means of collection and administration on taxes. Allthese problems caused the increase of the serous evasions of IIT and prevented the function of IIT on the management of economy.In Chapter3, the reforms on IIT in foreign countries are presented and the suggestions to China are discussed. In the first part, the reforms on IIT in foreign countries during different periods and the trend for the reform on IIT in 21st century are presented. Then the common features of reforms on IIT in foreign countries,such as the decreases on tax rates and brackets, the use of exponential parameter in IIT system and broadening of tax bases, are analysed. Finally, the suggestions to China are discussed.As the most important part in this thesis, chapter4 presents the measure of reforming and perfecting the IIT system based on the reality in China and the knowledge in previous chapters.