The Research Of The Expense Deduction System Of The Personal Income Tax Law In China

The Personal Income Tax is an important tax which can regulate income distribution. It often plays a positive role on protecting national interests, regulating income, easing the contradiction of unfired social distribution, increasing the state revenue. The Expense deduction system is an important part of the Personal Income Tax system, which can affect the amount of the Tax liability. The principle of the Personal Income Tax is:to impose taxes on the net income. That is to say, we should deduct the operating expenses and the taxpayers' cost of living firstly. The Expense deduction can be divided into three categories:first of all, the operating cost and expense which matches to the taxable income; the second, the tax-free deduction and the deduction of livelihood which matches to ones'capability; at last, the cost which is encouraged by some particular social goals.At present, there are a lot of problems during the operation of the Personal Income Tax system of China. Especially, the tax had not reduced the gap of income or eased the contradiction of unfired income distribution effectively, which had restricted the development of economic, and hind the establishment of the Harmonious Society. Recently, the CPI has been rising constantly, even raised up to 3.5%. A series signs showed that the current tendency of rise will not change. The Southern drought and the Northern low temperature caused the price of grain and vegetable rise a lot, which made the cost of livelihood increase obviously. Besides, with the deepening of the reform on Housing, Care and Education, residents will consume much more, not for a better life, but for the high price. For most people, their income can only solve their basic necessities, and save a little after that. The consumption increases constantly, but the Expense deduction still doesn't rise obviously, so that more and more people endure heavier Economic burden and higher pressure. This paper first introduces the concept and functions about the Personal Income Tax, and then explains the characteristic about the three kinds of Expense deduction method and how should we use the three methods. According to tax law requirements, the writer gives some advices about how to set the principle of Expense deduction system. The third chapter analyzes and compares the Expense deduction system of the Personal Income Tax of America, Japan and China Taiwan. Based on the analysis, the writer try to find out the commons of the Expense deduction system of developed countries and area. These commons can be used as our references, when we try to reform the tax system. In the fourth chapter, the writer pays attention on the present situation of China, and summarize the Expense deduction system of China, and analysis the problems in the existing system. The problems include the following aspects:(1)Categories income tax system is not reasonable; (2)the Tax Exemption is too low;(3)The standard of the Tax Exemption doesn't have enough flexibility;(4)Individuals shouldn't be the unit of levy taxes. Based on the present situation and the international advanced experience, the fifth chapter explains how to perfect the Expense deduction system of the Personal Income Tax of China. The main contents are:to adjust the system of the Personal Income Tax, we should apply Mixed income tax system gradually, and at the same time to repeal the current categories income tax system; to increase the amount of the exemption and to deducted the concession by fragments; to establish a flexible tax system, and to carry out a long-lasting system to reduce the impact of inflation about taxpayers'actual tax burden; to levy taxes by the family unit. So it can reflect taxpayers'comprehensive ability of payments, to make the people who have more ability pay more taxes. The others will only pay less or even none, to reduce their tax burden, and to realize target of fair taxation.