Study On Personal Income Tax System Of China

As an important tax for adjusting income distribution in China, personal income tax has been imposed for30years. It still cannot guarantee equity income distribution, although helping increasing revenue. The proportion of personal income tax in the whole revenue is very low. Compared with the Gini Coefficient before tax, the Gini Coefficient after tax does not change obviously. The function of personal income tax is weak. Indeed, there is converse consequence. Through study on personal income tax system, some reasons are found for explaining its weakness in adjusting income distribution, or even the inequity of redistribution. The reasons include:the fuzziness of the idea and the goal of taxation, the improperness of the pattern of taxation, the tax base, the tax rate, the tax payer, and the settings of the deduction of tax, the insufficiency of tax collection and management, and the proliferation of tax avoidance.In order to emphasize equity principle and intensify the adjustment function of personal income tax, we refer to the experience of personal income tax of some typical countries, which transform classified tax into consolidated tax, which delete the progressive level of tax rate, which debase the highest marginal tax rate, which levy personal income tax based on the family unit, and which reduce the range of preferential tax policy and standardize the policy. Nevertheless, our conditions are not suitable for consolidated tax. For changing classified tax into consolidated tax successfully, a special tax system is necessary.By analyzing the advantages and disadvantages of Across-Classified Consolidated Tax Pattern and Parallel-Classified Consolidated Tax Pattern, we find that the former has more complicated deduction level and proportional tax rate; It easily constitute a new tax loophole and cause large amount of administration cost and menu cost. While the latter is advanced, because it has clear direction and concrete process——firstly, interrelated system will be improved; secondly, tax terms will be consolidated to reform new terms; finally, classified tax will be changed into consolidated tax. There are some details:adjust tax base——3steps; optimize tax rate design——taking progressive rate primarily, and flat rate as supplementary; reset tax unit——individual or couple; standardize deduction level——vary with person, place and time; reducing the range of tax deduction and tax benefits——avoid tax base loss; improve the system of tax collection and management——the system of withhold and self-declaration.