Research On The Reform Of Personal Income Tax Model In China

Accompanied with the fast growing economy, although government revenue and personal income are increasing, new problems and challenging are rising. Nowadays, because of the enlarged income inequality and the defective welfare system, the rich are getting richer and the poor are getting poorer. The personal income tax doesn’t play the role it is supposed to play in minimizing income inequality. The current tax policy about personal income tax can not truly reflect the tax payers’ income and become outdated. Tax policy regarding personal income becomes the focus of the society as it does not only associate with government financial income but also associate with everyone’s benefit. An effective personal income tax policy plays important roles in minimizing the gap between rich and poor as well as stables the society. Deductions and tax rates based on classification of income tax,series of reformations in personal income tax has been made these years, but the result is not satisfied. Therefore, the old tax policy based on classification of income is no longer living up with current economy and new ideas are needed.This paper analyzes and summarizes the cons and pros of current classification tax policy based on the economy of China. By comparison among three different tax policies,reco-mmendation about the combination of comprehensive and classification policies is given. Moreover, the feasibility of such new policy is also discussed. The paper gives clear suggestions on how the personal tax reform should be carried out with the expectation to minimize income gap and stable the society.