A Study On The Flat Tax Reform Of Individual Income Tax In China

The income tax originated from Britain in the 18th century. After more than 200 years' development, the income tax system becomes riper and more complete, has played an outstanding role in organizing the fiscal revenues, regulation and control economy, have already become a important component in various countries' social life. But, during the process of improving and supplementing, the income tax system becomes complicated and tedious gradually, too. Meanwhile, the governments of many countries use the policy of the income tax extensively on such respects as the politics, economy, science and technology, culture, etc. Thus not only the inherent advantage of the income tax is given a great discount, but also a lot of harmful effects have emerged to the development of society and economy. So including U.S.A., a lot of countries are exploring how to solve current problems of the income tax now. 1981, researchers of American Stanford University Robert E. Hall and Alvin Rabushka have brought forward the scheme of the reform which name is "The Flat Tax". They think the best method of solving the problem that the current tax system appears is to reduce the tax rate, widen the base of tax, simplify the tax system and make tax more neutral and efficient. The flat tax has three major characteristics of the single tax rate, the base of the consumption tax, the clean tax base, just according with these requirements.Compared with western developed countries, the history of the individual income tax system of our country is very short. But having been implemented for over 20 years, especially in recent years, the individual income tax system produced a lot of questions and caused passive influence to the development of economy and society. Now, in society the voices of reform to individual income tax become more intensive. There have many schemes about the reform of the individual income tax. But these schemes mainly concentrate on disputation of the taxation mode, the design of progression tax rate and grades etc., and unable to study problems in terms of the whole income tax system. Some even misunderstand the regulating function of the individual income tax. As a new theory of the income tax system reform, the flat tax theory is introduced into our country in recent years. Some people make certain research on the theory of the flat tax. But the research is still limited to the simple introduction to the theory and hasn't make designs of it in China.This paper will make the design of our country's individual income tax system like the flat tax by adopting the method combining with real example and analytical method, using thethought of the flat tax and successful experience of the reform of some countries and regions in the world for reference and combining the actual conditions of our country. I hope to offer some valuable reference suggestions for the individual income tax system reform of our country.The full paper divides into four chapters altogether. In chapter one I make a comparatively detailed introduction to theory of the flat tax considering the situation that the theory of the flat tax is not so fully understood by our country. In this chapter through the retrospect and summary of U.S.A. federal income tax system, I analyzed the production background of the flat tax, the concrete design of the scheme and the influence to the economy. This chapter is a theoretical foundation of the paper, and provides theoretical bases for the analysis behind. In chapter two I introduced the flat tax reform made by some countries and regions. It is mainly about the reform of the income tax systems in Jamaica and Russia. Through this way I will present the successful experience on the reform of these countries and the enlightenment to our country individual income tax reform. In chapter three I analyzed the question that the individual income tax of our country exists at present and the influence to our economy and society, such as the injustice of tax system is, the serious loss of the tax revenue, the damage to the efficiency of eco...