Whether Mainland China Should Levy Inheritance And Gift Tax

Hoping for increasing fiscal revenue and narrowing the gap between the rich and the poor, the government of mainland China promulgated Interim Draft Regulations of the People's Republic of China on Inheritance Tax in 2004. It appeared that the imposition of inheritance tax was approaching. However, along with the abandonment of inheritance tax by Hong Kong in 2006 and Singapore in 2007, the U.S. government will also lower the tax rate to zero. At this very moment, worrying about going against the international trend and the outflow of domestic capital, Chinese government maybe hesitates to levy this tax.Using "Whether mainland China should levy inheritance and gift tax-based on the experience in Taiwan" as the subject, this thesis first discusses the evolution process and relevant literature of the U.S., U.K., Germany, Japan, New Zealand and Hong Kong, and then combines it with the opinion of mainland government, scholar and folks. By using the experience in Taiwan to support the imposition of inheritance tax in mainland, and the game among administration, legislation and interest groups as the point to presentation, this article could provide precious lessons if the mainland decide to levy inheritance tax in the future.This study suggests that:1. With 30 years of reform and opening-up, the gap between the rich and the poop has been considerably widened. If this problem cannot be resolved as soon as possible, it may ultimately lead to social unrest. Its best solution is imposing inheritance and gift tax with highly progressive rates.2. In oriental society like China, money and authority are always closely connected and cannot be easily separated. With the nature of aiming at high net worth individuals, inheritance and gift tax seems to be quite difficult to get passed. While reviewing the legislative progress in Taiwan, it is obvious that such laws can only be passed if these wealthy people cannot impose undue influence.3. If mainland China implements the inheritance and gift tax, firstly we should reduce the tax preferences and perfect the tax legal system in order to reduce the speculative opportunity for free-riders. Secondly, we should gain the expected equilibrium point between the cost of tax collection and tax revenue. If the legislative intent is social justice, we can consider the method of increase the cost of tax collection, while the legislative intent is fiscal revenue, we should reduce the cost of tax collecting.