Legislation Of China's Capital Gains Tax

Capital gains tax, as a kind of important tax in the capital market, is levied on the taxpayer's income during the transfer of capital assets. It is collected in many countries. Different kinds of capital gains taxes are restricted by various laws. Controversies are still unsettled in theory and in practice about if the capital gains should be taxed and how should they be taxed. At present, there is no clearly legal definition about what capital gains tax is in China. This leads to the lack of proper cognition of capital gains. Related regulations are written in scattered documents. That is why no unified legal adjustments to capital gains tax. The capital market is expending. But the taxation means to keep the market operating steadily and developing continuously. To improve the income tax system, it is necessary to tax on capital gains. It is also the inseparable part in the Government's devotion to strengthen the ability of adjusting people's income differences, then enhancement of legal regulation and control on capital market, the boost of national market competitiveness and the connection to international taxation. The possibilities of taxing on capital gains: 1. the growing capital market brings in great deal of capital gains. This provides the tax fund which can increase the tax income; 2. Developed international taxation system and abundant domestic practice are good examples set for the tax regulations and laws.In this paper, a comparative approach is adopted. Through the comparison of taxation systems in English and America, we can draw some key points which are helpful in the construction of our own tax system. Using the law and economics approach, on the capital gains tax required only to focus on tax fairness and to consider tax efficiency. Efforts are put on the analysis of the theoretical basis of capital gains and the basic concepts such as capital gains, capital income, income tax etc.. the goal of this research is to study the possibility and necessity of capital gains taxation system in China. Thus comes along the foundation of lawmaking and the general design of capital gains tax system. Details are like the entities being taxed, the selection of taxing basis, establishment of tax rate, tax procedures, tax term, tax location, tax preference and tax payers'responsibilities.