Reform Of Personal Income Tax Based On The Flat Tax Theory

Personal income tax is a direct tax widely levied in the world. Because of its equity,tax elasticity, progressive, avoiding double taxation, etc., it can play an important role inadjusting the the social economy, such as the ability to organize revenue, adjustingincome distribution. With the economic development and social progress, the personalincome tax are constantly reforming and improving.At the same time,governments andacademics have put forward a number of related programs. The flat tax theory is one ofthese reform ideas proposed by Hall and Rabushka in the1980s. At that time the U.S.government was facing a lot of problems, such as stagnant economy, complex taxsystem, tax efficiency missing. Hall and Rabushka proposed the flat tax therory to solvethose problems, whose main idea was"reducing tax rates and broadening the tax base,simplifying the tax system".The flat tax has three characteristics:flat tax rate,consumption tax base,tidy tax base.Although due to practical reasons, the flat tax reformprogram had not been adopted by the U.S. Government finally, but the idea still had aprofound impact. Not only the United States Tax Reform Act referenced this theory, butthen there are many other countries which achieve a flat tax reform, such as Estonia,Jamaica, Russia and so on.The most typical example is Russia, after the tax reform, theeconomy developed rapidly,the fiscal revenue also increased significantly, which hadmade remarkable achievements in reform.Our history of the personal income tax is shorter than the developed countries, butafter thirty years of development, the personal income tax has become one of the mostimportant tax and has a major impact on the development of China’s economy andsociety,while plays an important role in raising fiscal revenue,adjusting incomedistribution, making stable macroeconomic.Despite the rapid development of thepersonal income tax, there is still a lot of problems, involving collection mode, the taxrate, the tax base, tax collection, etc.. And due to the tax system’s imperfection,makesthe role of the personal income tax was supposed to play limited.For the currentsituation, the government and experts have proposed many different aspects of thereform program.But not a lot of literature combine the flat tax theory with analyzing thetax system and proposing policy recommendations,so this paper researches from thisaspect.Introduction introduces the topic basis,literature review, writing techniques used in this paper, the possible innovations, and shortages.Chapter1introduces the single tax theory, mainly on the basic theory in detail,paving the way for further research to do next below. This chapter first describes thebackground to produce a single tax theory, and then introduces the Hall and Rabushkaflat tax design, including the tax base, tax rates, collection and so on.Chapter2introduces the case of countries now implementing a flat tax system, andanalyzes and summarize the lessons learned from these countries.Chapter3analyzes the current personal income tax system.First, this part makesempirical analysis of the income distribution effects of the current personal income taxsystem, including the Gini coefficient, the average tax rate, income sources,which leadsto the lack of tax system.Then this part compares our country’s tax system to the flattax system,and proposes the contents of the tax system reform, in order to pave thereform proposals presented below.Chapter4proposes policy recommendations,Including collection mode, tax rates,tax incentives, expense deduction, tax collection, etc.