On Regulation Function Of Current Individual Income Tax Law

Since the implementation of the reform and open policy, China's economy has been developing rapidly and people's living has been greatly improved. As a result, the individual income tax ("IIT") revenue boosted from 4.7 billion in 1993 before the taxation reform to 173.7 billion in 2004. Whilst increasing the government's financial income, it is exposed to public that the current IIT does not play its role well in regulating the unfair distribution. With the promulgation of the Amendment to IIT Law in October 2005, the society once again has been focusing on the regulation ftmction of IIT. On the fourth conference of the 10th National Congress, Prime Minister Mr. Wen Jiabao pointed out that the keystone of this year was to seriously carry out the amended IIT law and reduce the tax burden of the poor. This can be deemed as an important signal from China's central government to enhance the regulation function of IIT.Under the circumstance of socialism marketing economy, being a regulation measure, IIT,not only shall bring its regulation function into play through imposition, but also shall reflect the Fair Principle and the Capability to Tax Principle. It is to endeavor every effort to eliminating the unfair imposition and enlargement of the gap between the rich and the poor owing to the irrationality of taxation itself. To enhance IIT's regulation function is essential to maintain the social stability and harmony and to realize the joint wealthy throughout the country. China has entered into WTO. Our taxation regulation and reform must be taken in the background of global taxation reform, in reference to the successful experience abroad, to comply with the global practice in IIT step by step. The author hereby believes that it has strong theoretical and practical meaning to conduct a thorough research in the regulation function of China's IIT and set forward relevant constructive measures.The regulation function of IIT is the research direction and key of this paper. The author starts from the basic theory of IIT, including its definition and characters, functions, legal principles and taxation modes, from concept to system, from theory to practice, gradually analyzing in the way of systematic analysis and comparison research.Linking the experience of overseas liT, the author then analyzes the problems in current IIT's regulation function and brings forward the following measures to perfect it:1. Reform the deduction criteria, taking education, marriage and family and house purchasing for self-living into consideration; eliminate supranational treatment; set floating range of deduction criteria to minimize the area difference and cope with the economic instability.2. Reform the taxation mode to substitute the classified taxation with the classified and comprehensive taxation;3. Limit the tax grade to five and the highest margin rate to 35% or so. Define the levy range in an anti-enumerative way to expand the tax base;4. Strengthen the collection and imposition function. Widely apply unified tax number system and enhance information technology and penalty force to ensure the best adjustment function of IIT.