On The Improvement Of China's Individual Income Tax Law

Individual Income Tax plays an indispensable role in state revenue collection, fair distribution, economic control etc. In virtue of various factors, there is still a long way to go in fully developing the due function of Individual Income Tax, which indicates that it is urgent to amend and perfect China's current Individual Income Tax law.In the perspective of the pattern of the current taxation system, the current Individual Income Tax system is a kind of less comprehensive one based on classified incomes, which is both simple and convenient for tax collection and administration, but detrimental to materializing thorough fairness. For the time being, the improvement of the pattern of taxation system based on classified incomes should be considered as the main task, and the pattern of taxation system based on classified and comprehensive incomes as an interim method, and the ultimate aim is the adoption of the pattern of taxation system based on selected and comprehensive incomes.The definition of Individual Income Tax payers in the current Individual Income Tax law is vague and the scope of resident taxpayers is too narrow. Therefore, for the purpose of defending state economic sovereignty, we should make clear-cut the scope of resident taxpayers, unify the standard of the residing period applied to resident taxpayers, and set up authentic mixed tax jurisdiction.Stipulated by samples, 11 taxable items of individual Income Tax are involved in the current Individual Income Tax law. Considering the fact that more and more new taxable items are come into being, general norms should be used for covering the new comers and suit the situation better.The Individual Income Tax payable for different taxable items and different individual incomes is computed according to the 9 grade 3 class progressive rates.Such a complex and trivial rate structure with a high marginal tax rate of 45% is likely to bring about the unfairness of tax burden.China's current tax rate structure incarnating fairness and efficiency better, the grades and classes of the progressive rates as well as rate itself should be reduced appropriately, in the meanwhile, much attention should be paid to the impact of inflation to see that the adjusting force is consistent with the taxpayers' income level.Expense deducting stipulated in China's current Individual Income Tax law is based on different individual income levels. Practice has witnessed that the prescript on deductions from income from wages and salaries is not reasonable in that the scope of expense deductible is too narrow. In consideration of it, the following measures should be taken: appropriately raise the amount of expense deductible as well as work out a mechanism where the amount is allowed to vary with the fluctuation of wage level and price level; authorize each province to enjoy a right of discretion to change the amount within a given range on the basis of unified expense deduction standard; cancel the prescript of the additional deduction (3200 Yuan) applied to special groups of taxpayers; extend the scope of expense deductible, e.g. deduct expense on means of livelihood; adjust the standard of expense deduction in light of inflation rate so as to actually reflect tax payers' ability to pay taxes.In order to cope with the phenomenon of tax evasion and avoidance and fully develop Individual Income Tax's function of adding fiscal revenue and adjusting social distribution, some drastic measures should be taken, for instance, to raise taxpayers' taxation consciousness, to normalize tax agency, to upgrade the means and techniques of tax collection and administration and to strengthen tax audit and investigation.