Research On Collection And Management Of Individual Income Tax

Individual income tax (hereinafter referred to as IIT) is not yet a main tax category in the current tax regime in China, but its total revenue has reached a record of 318.5 billion Yuan in 2007. Meanwhile, it draws enormous attention due to its wide scope of collection, close association with personal interests, and redistribution function. How to facilitate collection and administration of IIT, and give full play to the role of IIT in collecting revenue and regulating high incomes, is an issue that must be confronted with in present tax reform.The main content of the thesis is as follows:Part 1 concerns the status quo of the collection and administration of IIT. These factors, including the gross, the revenue structure, the revenue growth, the collection and payment costs, the tax burden and the social satisfaction of the collection and administration of IIT, represent the overall condition of the collection and administration of IIT in China. Research indicates: the gross of IIT has been experiencing steady increase since 1980; income from wages and salaries, and income from interests, dividends and bonus, together with income derived from production and business operations by individual households engaging in industry and commerce, which are the three major sources of revenue of IIT, accounting for 90% of IIT revenue; withholding IIT is a major means of collection and plays an important role. Concerning the cost of tax, it holds that both tax cost and its coefficient have shown an increasing trend, and there is an optimal point of collection and administration. After rough calculation, it comes to the conclusion that collection cost of IIT in China is higher than that of developed countries and some developing countries. From the perspective of macro scope and micro scope, it points out the tax burden of IIT in China is lower than that of developed countries and some developing countries, and nominal tax rate as well. Finally, after analyzing the comment on IIT from all walks of life, it suggests that the opinions of all parties be considered.Part 2 concerns the problems of collection and administration of IIT. First of all, it dwells on confirming the taxable income, the reverse regulation and its primary reason, shortcoming of the collection and administration and its implementation process when discussing the IIT institution. Secondly, it emphasizes the obsolete technological infrastructure and settlement system, shattered credit system and loose cooperation among related units. Thirdly, it discusses the incompetence of tax authorities and personnel in handling collection and administration. Finally, from the perspective of taxpayers, it explains the problems of collection and administration of IIT.Part 3 concerns the following policy proposals for tax reform and strengthening collection and administration of IIT: 1. to implement an IIT system that combines classified and comprehensive tax system; 2. to declare all taxable income obtained in the whole year and widen the taxable scope. Deduction items shall be divided into living, business, and specific ones. Living items are allowed to deduct when withholding or pre-paying tax, while the other two items are allowed to deduct when declaring tax at the end of the year. 3. to specify individual as declarer; 4. to lower the marginal tax rate, reduce the grade and increase the bracket; 5. to define the principle of designing tax preferential treatment, such as narrowing scope, reducing content, adjusting structure and combining exemption and increasing budget outlays.The last part concerns the measures of strengthening collection and administration of IIT. It suggests: establishing an individual economic identity code, which combines ID information, social security information, individual income and expense information; reforming payment measures, setting up the cross examination system of individual income information to facilitate the information acquisition and management; enhancing the compliance with the tax law by expanding tax auditing and enforcing stiffer penalties; improving implement of specific policies. In brief, a strong and powerful collection and administration system should be established, in which tax authorities is a principle part and related department do their best for collecting tax , to improve the collection and administration of IIT and give a full play of the role of IIT.