A Study On Strengthening The Personal Income Tax Effect Of Regulating Income Distribution

Personal income tax is a direct tax levied on citizens, thus it has incomparable advantages over other kinds of tax. Now most countries in the world Levy a personal income tax which is regarded as one of the main sources of revenue. With the continuous development of economy and the widening income gap, compared with countries which have a relatively sound personal income tax system, in our country, the income distribution effects of personal income tax, the regulating of income gap between rich and poor residents as well as the reducing of the Gini coefficient are insufficient. In some year even appeared "reverse adjustment" phenomenon. The main reason for this situation is the regulating of the high income people’s income is not enough, which involves evolving into a "payroll tax", the unclear scope of taxation, the imperfect of related tax, the weakness of tax consciousness of citizens and so on. Since implementation from1981, individual income tax is revised almost every three years, but basically palliatives. The fact that the income gap is increasing rather than reducing shows there is a big gap between the effect and expectation.This paper focuses on "the role of adjustment of revenue allocation of personal income tax". Through theoretical analysis, it is discovered that the property income tax plays a role in coordination of income distribution and "internal stability " and there are several factors restricting it, mainly including economic conditions, the perfection of tax system, Government policy, tendency of high and low income earners, tax consciousness of citizens, perfection of the other related taxes as well as the level of collection and management of the tax authorities. This article also involves analysis of the problems and shortcomings of China’s personal income tax system. As is well known, at the previous stage, the income gap is gradually expanding and constant attention is paid to the reform of national income distribution. In this paper, STATA.10measurement method and time series model are used in the empirical study of annual pre-tax and after-tax income of residents. The conclusion that the personal income tax has a significant effect in adjusting the gap between high and low income earners is verified.That is, the level of income of high-income and Gini coefficient is positively correlated, while the level of income of lower-income and Gini coefficient is negative correlated. A conclusion was also drawn that to reduce the average disposable income of high-income earners, the average tax rate of the low-income and middle-income earners as well as to increase the average tax rate of the high-income earners, the disposable income of low-income and middle-income earners can reduce our Gini coefficient, narrow the income gap and be conducive to the fairness and stability of society. The fifth part of the article compares and selectively draws on the successful experience of other countries and regions (including Europe and the United States, Australia, India and China Taiwan and other countries), proposes targeted solutions on policies and management measures to change the current situation of China’s personal income tax system deficiencies. These measures mainly are:improving the personal income tax system at this stage, turning the personal income tax from payroll taxes to the capital tax, regulating the income of high-income, perfecting other supporting tax measures and launching a pilot project to reform negative income tax system.