Research On High-income Individuals’ Compliance Risk With Personal Income Tax

According to China’s State Administration of Taxation statistics, since ourcountry stipulated the annual income of over120,000high-income individuals todeclare personal income tax, From2007to2010, The number of high-incomeindividuals who declared their personal income tax is about2.13million,2.4million,2.69million,3.15million, and the tax payment of individual income tax revenue isaround35%of the annual gross individual income revenue. But according to thereport issued by China merchants bank (2011), in2010the number of high net worthpeople with investable assets of more than1million is more than500,000,and Theypossess wealth accounted for24%of the total social wealth. The investigation by Liqiang (2008) shows that the number of private owner that earning more than150000is as high as10million. Comparing the number of high-income individuals and theamount of wealth possessed by them, the high-income taxpayers who cannot complywith tax law will be more serious. High-income persons "do not tax" not only causedhuge loss of revenue, and increasing inequality of income distribution.Based on the OECD member countries’ practice of tax compliance riskmanagement for high net worth individuals in recent years, we summarize theexperience for reference. According to the characteristics of high net worthindividuals: complexity, revenue, opportunity and integrity, Tax authorities adopt theprocess of compliance risk management. Like risk management in general,compliance risk management is a structured process for the systematic identification,assessment, ranking, and treatment of tax compliance risks. After the acquisition offull, timely and accurate information, they analysis and processing information by theuse of data comparison, data mining methods, then use Compliance Risk RatingMatrix to sort of compliance risk. The tax authorities deal with risk of high net worthindividuals by means of strengthening tax law awareness, efficient tax services, taxaudit and standardizing tax intermediaries’ activities.According to China’s status of tax compliance risk management abouthigh-income individual, Major policy recommendations in this paper:First, establish a full-time risk management institutions, as well as efficientchannels of communication to ensure that internal and external information is true,accurate, timely and adequate collection and delivery.Second, manage information data, combined with local high-income sources ofrevenue distribution and difficulties in tax management, then screen key taxpayers.Third, determine alert value of reasonable evaluation indicators, sort of risk by means of the comprehensive Risk integral of weighted risk point indicator, andimprove the risk assessment system.Finally, provide the corresponding tax service; improve the level of tax services,the establishment of efficient assessment and inspection mechanisms, whilestrengthening cooperation with tax intermediaries and supervision.