A Study On The Optimization Of Individual Income Tax System In China From The Perspective Of Equity

In recent years, along with our rapid economic development, the people’s livingstandards increase at the same time the residents’ income gap is also expanding. Theincome gap should not be trifled in the process of retaining social stability andsustainable development since it could become quite a great obstacle to theeconomic development. Tax as the most direct way to adjust income distribution hasbeen panegyrized by sociologists and economists. Therefore the nationalgovernments are taking the tax system as the universal method for a fair distributionof income, especially, the personal income tax system, which plays a unique role inincome fairness distribution. However the personal income tax is so young that it hasexisted only for30years. Now it has been concluded that the personal income taxcan regulate the income distribution. How to further strengthen the personal incometax regulation and to improve its system have turned into urgent problems. So it hasbecome one of the challenges that have been met and need to be solved in tax theoryand practical work. Solving these problems is also the intention of this paper.Two conditions must be satisfied if the justice is effectively done to regulate theincome distribution by the personal income tax. The first condition is that the taxmodel should timely change based on china’s specific conditions and on reflectingthe person and family real capacity to pay duty. The second one is to improve theessential of taxation system, such as rates, fees for deduction standard and taxincentives. Based on these, this paper under the view of fair distribution, holding the"full of income adjustment fairness" subject to tax fairness principles and tax system,relying on the status quo, regulating income distribution, analyzing the incometheory and empiricism, fully exploits the shortcoming of present tax systems andtries to learn from the developed countries’ experiences about personal income taxand explores our tax reform direction and design of income tax system.One of the main functions of personal income tax is regulating income distribution of people and preventing from unfairness. But there are many aspectsthat violate the principle of fairness, such as the taxation system, expenses deducted,tax model elements, tax collection and administration of justice. Under the fairnessview the paper chips at our present personal income tax system and points out thetax revenue fairness deficiency. The reasons are deeply analyzed and some specificproposals are made on improving the present personal income tax. The justice isintroduced on the basis of those reasons. It is well known that the personal incometax is a regulation of social wealth, personal income distribution. So it can narrowthe income gap effectively. Through the personal income tax reform the leverage shouldperform actually and effectively on distribution of social wealth. The content of the paperinvolves two central parts.In first part, the unfair situations and their reasons about the current personalincome tax are analyzed. This chapter combines tax theory with actual data toexpound the income distribution situations from tax model choice, tax design, taxcollection and management efficiency. It is found that classify tax is one of thereasons for the unfairness distribution of tax burden. The current unfair tax systementails specific problems and fairness missing is apperceived from tax rate, tax baseand the design of the existing taxation system. And the unfit tax administration lawand the weak revenue collection capacity affect the equitable distribution functionsof the tax. Moreover, tax payers have poor paying tax consciousness as well as socialassessment system has led to the existence of avoidance or evasion. Therefore theunfairness of tax is serious and computed based on unjust.In the second part, the detailed approaches on tax reform have been put forward.This part fully refers to the advanced experience of developed countries and from theperspective of fairness of tax systems. The relevant measures have been taken toregulating the personal income tax. A mixed taxation system design mode has beenoffered, which is suitable to our national situation. That is, the personal income taxsystem should be designed reasonably, the tax collection and management should bestrengthened, and the tax collection and management external environment should beoptimized. By means of these measures the questions of unfair income tax burden will be solved. So the function of the individual income tax on income distributioncan play an important role in regulating and reducing the gap between rich and poor.As a result, social equity and justice can be achieved.