Research On Designs For The System For China To Adopt Capital Gains Tax On Equity Trading

Capital gains taxation as an important tax in stock market adopted by lots of countries is a kind of tax which taxes revenue realized through equity trading. There exist huge divergence, however, not only in principle but also in practice. Consequently, capital gains taxation is not a stable tax, nevertheless. To cultivate and stimulate the healthy development of equity market, it has not been started yet in China since the establishment of stock market. Weather adopting capital gains tax has been concentrated and is a sensitive issue in the stock market. In the past few years, there frequently arised the hearsay that government will adopt capital gains tax. Consequently, the stock market disturbed each time and it induces drastic arguments of scholars and investors and the relating government sector. Seeing from the tendency, it is necessary to adopt capital gains tax for china stock market,and how and when to adopt is a key problem. In modern society, the status of stock market is becoming more and more important, furthermore, effects of adopt capital gains tax are extensive and complex. There exist huge distinction between capital gains tax on equity treading and ordinary income. So there exist many difficulties in how to enforce this tax and there also exist large distinction in the detail tax system design in different countries. This paper analyzes economic effects of capital gains tax on equity trading systematically, references approaches performed in other countries, combines the truth of our country, presents the system design in our country and analyzes the difficult point to adopt capital gains tax and finally present relating solutions and suggestions.This paper consists of 7 chapters.Chapter 1 is about review of research editions, which summarize relating research and opinions by internal and external scholars.Chapter 2 primarily provides the rationale for adopting capital gains tax on equity trading, which contains comprehensive income—Haig-Simons Definition,morger western equity principle on taxation and the theory of tax control.Chapter 3 analyzes effects of capital gains tax on equity trading on economy. Analyzes effects of capital gains tax on equity trading on firm's capital structure and on dividend policy from the angle of micro-view; anaylzes effects of capital gains tax on equity trading on the scale of stock market, on performing eddiciency and on equity prices from the angle of medium-view; and analyzes effects of capital gains tax on equity trading on individual savings, on social investment and on the efficiency of capital distribution from the angle of macro-view.Chapter 4 primarily analyzes the necessity and feasibility to adopt capital gains tax on equity trading. Form the point of necessity, primarily included making securities tax system imperfect, and stimulating the healthy development of stock market; adjusting income allocations and arriving social equity; approaching international regulations and preserving country's tax benefit; making up unfair situations in current securities market; collecting finance revenue. Gradually developing and perfecting of stock market, electronic for equity trading and system establishment and the informatization establishment for taxation collection and management provide feasibility for adopting capital gains tax.Chapter 5 makes a comparison among most countries and areas tax system of capital gains on equity trading, and then propose suggestions to our country.Chapter 6 state the design system to adopt capital gains tax from the deciding of taxpayer, the choosing of taxing methods, design of tax rate, identifying of taxing range, identifying of tax bases, dealing with of capital losses and preferential policies. As for the indentifying of tax payers, tax payers of capital gains tax on equity trading refer to as enterprises, and individuals who engage in equity trading. As for the choosing of taxing style, sperately taxing should be performed for designing of tax rate, proportionate tax rate and lower tax rate should be imployed. As for the choosing of tax bases, under the standard of the realization of capital gains to indentify tax bases, the amount of taxable income is the net proceeds in one taxable year of a tax payer's equity selling out prices subtracting buying prices and trading costs tax on equity trading, stamp tax on equity trading and fees. As for taxing range, contains interal and external equities being listed stock and not listed stock. As for the dealing with to capital losses, permit capital losses to be deducted from equity capital gains, and the rest that cannot be deducted is permited to deducted from later years. As for preferncial tax treatment, set a certain degree of amout of exempting and perform preferencial tax treatment for long-term capital gains.Chapter 7 primarily presents difficulties to adopt capital gains tax on equity trading. Simultaneously proposes corresponding solutions. The biggest difficulty for us to adopt capital gains tax on equity trading is that the adopting may attack the operation of stock market and choose the appropriate opportunity to adopt. This paper provides suggestions for the above difficulty. To alleviate the attack, we may make investors be aware of the tax through positive propagating; as enacting lower tax rate, remove stamp tax on equity trading; further develop institutional investors, follow the non-retroactive character when adopt capital gains tax. Combine macroeconomic situations and the performance of stock market to determine the adopting opportunity.