A Study On The Expense Deduction System Of Individual Income Tax In China

Expense deduction is an important part of Individual Income Tax, it has direct influence on the amount of taxable income. From the content of expense deduction in foreign countries, we can see the expense deduction commonly includes essential expense deduction, living expense deduction and special expense deduction, and the implement of expense deduction not only has the functions of income redistribution but also the functions of optimizing resource allocation to conduct consumption to some extend .As China further implement its economic reform, the level of people's income and expenditure has both improved greatly. However, not any change has taken place to deduction. Therefore, it results in weakening the functions of individual income tax for regulating income redistribution, and having side-effect on resource allocation, which go against the principle of equity and efficiency. Besides, one of the reformations of China's individual income tax is to change the classified income tax to classified and aggregate income tax, so the deduction must be changed correspondingly. Under this policy and China's practical economic situation, this dissertation points out some suggestion to expense deduction system. Firstly, the expense deduction system should also include essential, living, special expense deduction; Secondly, taxpayer's family members should be considered in living expense deduction; Finally, medical expense, education expense and interest of loan for house should be added to special expense deduction, at the mean time, taxpayer should have the right to choose the way of deduction. .