A Policy Analysis On The Individual Income Tax Law Of China (the Third Revision, 2005)

Since China's reform and opening up, the personal income gap in China has being increased. And now, China has become one of very unequal income distribution countries. At the same time, the individual income tax expected highly doesn't make an active role in adjusting the personal income gap as expectation, which differ with the requirement of "harmonious society". To comply with the situation, in 2005, the individual income tax law in third revision was issued. But is the policy reasonable? How does it make its effect? How to perfect it? It is a question.With an angle of logical process analysis in public policy, for example, the policy background, target, establishment, performance, evaluation, optimization etc., the paper discusses the individual income tax law in third revision, then exposes the relationship between the individual income tax and social equity, at last, makes some suggestion. There are four parts in the paper.As a scope discussion, the part one analyses the background on the revision of the individual income tax law. It introduces the status quo of income gap and discusses its reason and its passive influence. Meanwhile, this part also recommends the individual income tax system in China and its shortage in adjusting income distribution.The part two is a process analysis of tax policy. Firstly, with discussion between the principle of taxation, esp. the principle of tax equity and the tax legalism principles and the revision of the tax law, the paper concludes the aim to the revision of the law should achieve the social equity. Secondly, the paper defines the advancement of the revision of the law. Thirdly, the paper brings out some passive factors for policy performance. At last, the paper expresses the gap between result and aim and makes a policy evaluation.The part three reveals the reason of the gap between the policy result and aim by reasoning on policy rationality, policy environment and resource factors. The policy itself has five defects, such as selection of types, the standard-setting, the main taxpayers, the tax rate difference, method of payment; The policy environment has three negative aspects, for example, confused distribution of income, poor coordination among various departments and incompatibility of the target groups; The policy resource lack of systematic and supporting policy of tax.The part four is the policy optimization. The paper suggests on improving the individual income tax in China from six aspects, such as integrative tax system, flexible tax system, the family withholdings, reduced class by increasing distance between upper and lower limit, taxpayers'own declaration and yearly calculation and imposition. Then the paper advises to establish a fair and ordered tax environment in four aspects: real-name deposit, bills to pay, income reports and information sharing. At last, on promoting assorted policy for social fairness, the paper proposes as follow, the imposition of social security tax, levy estate and gift tax, levy property taxes and favorable tax policy for social donation.Based on the above logical process, the paper shapes an analysis model in tax policy with logical process in public policy as an analytical tool, which shows the most characteristic and innovative in the paper.