The Deduction Of Income From Wages And Salaries In Tax

Individual Income Tax is one of the most important taxes in our nation. It’simportant at realizing income distribution and secondary allocation, accommodatingthe poverty gap as government regulation. The deduction of wages and salaries inIndividual Income Tax Law adopts unified expense deduction standard of the nation,which is gradually improving in the recent revisions of Individual Income Tax Law.The adjustment seems fair, which reduces the levy range and relive the burden ofmid-low-income group. However from the legal nature of the deduction of wages andsalaries, it’s not the deduction higher, the better accordance with the economydevelopment trends. If the deduction of wages and salaries is unreasonable, thetax-law function of revenue protection and income distribution adjustment won’trealize. And it will go against stability maintain and social fairness and justice.The purpose of levying Individual Income Tax is adjusting imbalance of formequalitarianism distribution. There is the phenomenon of income difference and livingstandard gap, because of the different ability of earning money and owning property.If the poverty gap increasingly expands, there will be many social problems. And thesocial economy development will be affected. So through the macro-control andadjusting the social poverty pap from tax, the society will realize fairness. In addition,it’s not long for market economic development after reform and opening up, notperfect of market competition mechanism, and human factor on income distribution,which the poverty gap and income distribution must be controlled with effectiveeconomic means.The regulatory effect of Individual Income Tax Law is important, but IndividualIncome Tax Law must be accordance with fair principle, to promote social stability,fairness and justice. The deduction of income from wages and salaries in currentIndividual Income Tax Law isn’t playing its role, because the low income peoplecomplain the tax unfairness as well as the high income people think the tax is too much. It shows that the deduction of income from wages and salaries currentlydoesn’t reflect the principle of tax fairness.The paper focuses on the deduction of income from wages and salaries.Individual Income Tax Law has been promulgated for a long while, which didn’timplement because of the social and economic conditions. It didn’t implement until1980.Our society has changed greatly for more than three decades after that, and thenational income level has greatly improved. Individual Income Tax Law has beenrevised for several times and the deduction of income from wages and salaries hasbeen successive improved in order to keeping up with the trend of economicdevelopment and income growth. However the improvement of the deduction ofincome from wages and salaries can’t solve the problem of regulating incomedistribution. The deduction of income from wages and salaries can’t be simplyregarded as living expense per month, so that it is revised according to easycalculation which is a necessary cost of wages and salaries, the non value added partof taxpayers’ property and the cost of people survive and development. If thededuction of income from wages and salaries is unreasonable, how to determine itand how much is it? Firstly the deduction shall follow several principles, tax legalprinciple, tax fair and ability-to-pay principle, the tax efficiency principle; Secondlythe deduction of income from wages and salaries should consider the taxpayer’sburden, marital status, family composition, and the number and the health whotaxpayer supports and so on. And unified expense deduction standard of the nationshould be established, which consider the living cost, work cost and some special cost;thirdly cost floating deduction should considering be created in order that thededuction can closer to economic development. Once the inflation pressure beyondthe fixed limit, the deduction will be determined by combination with correspondingcoefficient. It’s non-ideal regulation effect to simply determine the deduction ofincome from wages and salaries. The deduction and the tax rate are importantrelevant taxation elements, so it should be paid attention to the synchronous reformsof tax rate. We should continue to expand the grade steps, combine the grades, andreduce the marginal tax rate based on our current rate3%to45%seven grades extraprogressive rate. In addition, relevant measures should be improved besides the deduction of income from wages and salaries. It’s an inevitable trend to implementcomprehensive income tax in our tax system, but we should establish the mixedincome tax in transitional stage, doing well the publicity of legal system andenhancing the taxation awareness of taxpayers, so that the Individual Income TaxLaw can play a good role in the revenue protection and distribution adjustment.