The Reform And Perfection Of China's Individual Income Tax Law

In 27 years the Individual Income Tax has become an important tax in China that generates more than 245 billion Chinese Yuan revenue annually and affects hundreds of thousands of households.However,its strict analytical system,non-detailed deduction system,unfair tax rates as well as poor administration have made the current Individual Income Tax Law incompatible with the current situation in China characterized by an increasing diversity of income and a widening gap between the rich and the poor.The Chinese Individual Income Tax is in an urgent need of reform and improvement due.Since the Autumn of 2005 the Chinese authorities have introduced five measures to improve the current Individual Income Tax system including raising the general deduction for wages,enforcing compulsory tax returns among high income tax payers,lowering the tax rate on the interest of savings etc.However,these adjustments are not able to solve the problems caused by the unfairness of the current Individual Income Tax Law.The Eleventh Five Year Plan,which puts a great emphasis on the redistribution of income and social justice,has set a clear goal for the reform of the Individual Income Tax,namely "introducing a mixed analytical-globle tax system".The Plan has put fundamental reform of the Individual Income Tax on the agenda,making the design of a new mixed Individual Income Tax structure an urgent topic of research and study.In line with the directions set out by the Eleventh Five Year Plan this dissertation explores the reform of the Individual Income Tax from the following six aspects.After a brief introduction on the background and the purpose of the study which forms the first part,the second part of the dissertation explores the theoretical basis of the Individual Income Tax by comparing general tax theories and analyzing the historic development of the Individual Income Tax.Furthermore the second part contains an economic analysis of the Individual Income Tax.The third part analyzes the insufficiencies of the current Individual Income Tax Law.It serves as a basis for the following parts by defining the flaws and weaknesses of the material as well as the procedural Individual Income Tax Law and the inadequacies of related laws.The four part sets out the principles of the Individual Income Tax reform.As the reform of the Individual Income Tax is a sophisticated long term project,it is necessary to define the guiding principles without which the reform may run the risk of losing its course.The fifth part focuses on the reform of the material Individual Income Tax Law.It gives a design of a new system of income grouping. Furthermore it gives suggestions to the improvement of the current definition of taxable incomes,deductions and the tax rate structure.The procedural Individual Income Tax forms the core of the sixth part. It begins by giving a design of a new individual income tax procedure consisting of four steps,followed by a discussion of the importance and the principles of the protection of tax payers' rights.The sixth part is concluded by an analysis of two important tax payers' rights,namely the right to information and the right of tax planning.The last part gives suggestions to the improvement of laws and regulations related to the Individual Income Tax such as real name financial law,government expenditure publicity law and tax agency laws and regulations.