On The Reform And Perfection Of National Individual Income Tax System

The system improvement is inevitable; one kind of system has not been allowed to solve the new potential problems once and for all. Moreover every system has been established under a certain social environment, including politics, economy, humanities and other elements. The same is true with the reform of individual income tax (IIT) system in our country. When new problems emerge, it is the signal that the present system cannot fit into the time. It is in the 1980s that our country legislated to levy taxes on individual income, and during the past two decades, the substance income has risen at a high speed; in fact, though China's top legislature issued the new threshold for taxable income, 1600 yuan in 2006, the national IIT total continues to maintain the growth. In 2006 the total has risen to 245.2 billion Yuan, 17.1% higher than and 35.8 billion Yuan more than that of the previous year. But without a doubt, as a result of the influences from the social and economic changes, the backwardness of tax system as well as many other factors, IIT's functions, like managing income and the adjusting distribution, has not yet executed to the full, and tax evasion is still a common phenomenon. Therefore, this article started with analyzing the existing problems of the present tax system, focuses on studying the development tendency of IIT system, and aims at a relatively complete discussion about the reform and perfection of IIT. The whole study takes the methodology of abstract to concrete, general to special, and theoretical to practical.This thesis is divided into three sections --- the introduction, the main text and the conclusion.The first section introduces the various kinds of income tax in different countries, as well as the present IIT law in China.The main text has been further divided into the following three parts: The first part is an analysis of our country's individual income tax system. Firstly, it tells about the special traits of our country's IIT system; the modes of tax collection, tax rate, expense deduction, and levying methods were highlighted. Chinese IIT system was compared crosswise with other countries, revealing the true situation from a different aspect. Next, it related the existing problems of Chinese IIT system in detail, including the scheduled income tax is unreasonable, the expense deduction is unreasonable, the tax revenue collection is imperfect; and the IIT system is imperfect. Among these four aspects, the realistic situation in China come the top of the list, and the strengths and weaknesses of the present income tax system; The flaws of present expense deduction was pointed out regarding to the principle of equality; The problems with the present the tax revenue collection system lies in its initial distribution of individual income and the realistic problems in levying tax; The imperfection of the present tax laws were criticized for its poor execution and the obvious backwardness in comparison with the reality.The second part is about the tendency of our country's individual income tax system development, highlighting the functions of IIT. Theories about its functions fall into two categories: (1) The main function of IIT is provide the financial revenue for the government, with adjusting the distribution as its derivational function; (2) The main function of individual income tax is adjustment, aiming at narrowing the income gaps, rather than giving financial support. This article has first pointed out these two functions, then analyzed its real functions in accordance with the historical development in different countries, finally drew the conclusion that the individual income tax mainly functions in organizing financial revenue, and adjusting income distribution can not be ignored . No contradiction between the two functions. Therefore, we must correctly handle the relationship between them.Based on this, the article took the US'S individual income tax system as example, predicting our country's IIT system development tendency, which includes three aspects: to place the main function of IIT on the organization of financial revenue, to simplify the individual income tax system, and to broaden the tax base and reduce the tax burden to an appropriate degree.The third part is the core of this article, tackling the possibility to perfect our country's IIT system. The discussion about many problems in the first part served as a foundation for this part, and in respond, this part attempts to solve the flaws in the present individual income tax system. One of these is to choose among the modes of income tax collection; generally, the options are: classified income tax system, synthesis income tax system, and unifying synthesis and classification system, each with its own advantages and disadvantages. This article elaborated to ascertain that the present classified income tax system of our country should be converted to the one unifying synthesis and classification. With reference of the history of IIT development in different countries as well as the specific situation in China, the present purely classified income tax system mode has already failed to meet the need of social development. Reformation will be inevitable, the unifying synthesis and classification system will be transitional, targeting at developing comprehensive system. Another move will be perfecting the present deduction system. Theoretically, this is in accordance with the principle of equality, and practically, many other countries have set good examples with advancement in their IIT system. The third move is to improve the present IIT levying system. At present our country credit system has not yet matured; the real name system of savings account has been implemented, yet far from be ideal; massive kinds of recessive income exist and much black casework of income distribution are beyond supervision; the citizens have a poor tax consciousness, tax evasion is commonplace phenomenon, etc. The above problems urge us to consummate the individual income tax collection system. At last, it remains to be seen what the future of our country's individual income tax law is. In October, 2005, the Standing Committee of the National People's Congress passed the revised "the Individual Income Tax Law". This revision symbolizes the maintenance and realization of social equality under the new situation. But along with the rapid development, "the Individual income Tax law" must be perfected and fit into the international and the domestic environment.