A Study Of Personal Income Tax From The Perspective Of Income Distribution

Personal income tax, which is charged on natural persons, is an important tax for the country to achieve the function of adjusting income distribution. Since its implementation in1980s, three decades has made personal income tax the fourth largest taxation of China, which has significant meaning in the regulation of income distribution and the promotion of social justice and fairness. However, with the constant development of economic society, some problems gradually expose, such as the unreasonable setting of tax system, weak effect of regulation, and the loss of equitability. In2011, the country introduced the sixth reform of personal income tax. Then, in the Third Plenary Session of the18th CPC Central Committee, the following statement was put forward,"We should further improve the income redistribution regulation mechanism with taxation, social security and transfer payment as its main measures, and expand the effect of tax regulation"; and the following specific introduction was given,"We should gradually establish and improve a kind of personal income tax system which is a combination of comprehensiveness and classification".The paper, which is based on the background of this policy and written at the turning point of the change of tax system, uses the method of literature review, data analysis and comparative analysis to study the income regulation effect of personal income tax. There is five parts of this paper The first part is introduction, which elaborates the background and purpose of the paper and the current research on this subject at home and abroad. The second part briefly introduces China’s personal income tax, such as its main effect, tax system and development history. The third part presents a comprehensive analysis of our current personal income tax system, pointing out the problems and insufficiencies in the following four aspects:the choice of tax system, the setting of rates and levels, the standard of duty deduction, and the method of tax collection. The forth part makes a comparison with other countries in personal income tax policy, especially summarizes the successful experience of America, the Great Britain and German from the above mentioned four aspects, then introduces the ways and means that can be learned to improve the personal income tax policy of China in the current situation The fifth part, basing on the former analysis of our current problems and referential experience from other countries, puts forward some suggestion on the improvement and reform of China’s personal income tax policy from the aspects of the choice of tax system, the setting of rates and levels, the standard of duty deduction, and the way of tax collection.