The Analysis On The Adjustment Of China’s Tax Revenue To The Income Distribution

The total GDP in China has leapt to the second in the world, but it faced with the problem of income distribution gap. The Gini coefficient of China estimated by the World Bank is between0.48and0.5(warning level is0.4). It is the sign of unequal income distribution. With economic development, the widening gap between rich and poor is the bed of social problems. China has to take an act with the problem. The12th five-year plan pointed out that we must reverse the growing income disparity as soon as possible."As soon as possible" fully reflects the necessity and urgency of the stage to adjust the gap between rich and poor. Either for expanding the domestic demand, or for raising the life level of people, it is very important to solve the problem of the income distribution in the next government reform. Tax as a fiscal policy to adjust the gap between the rich and the poor, has been played more and more attention to. Following the property tax, the personal income tax reform in2011was a big event. The tax reform has been drawn wide attention, and also has been generally welcomed by the people. People hoped to ease China’s wealth gap by this tax reform, but this reform was limited to the salary tax. The long-awaited tax reform does not touch the deep nature of the tax. In China, the tax does in the end play a role in regulating the gap between rich and poor or not is what we about to discuss in this article.We can learn from the foreign experience first. The twists and turns of the tax system from the Western countries can prove that the tax is very important to the income distribution. Then I will analyze the regulatory role of the U.S. tax on income distribution. The Gini coefficient in US is the highest in the richest countries. There is a large part of the reason is taxes. We learn from the experience of other countries that taxes play a role in regulating the gap between rich and poor, but it relays on the tax designing. A designing tax system which is not fair may even widen the gap between rich and poor.China’s tax adjustment for the income distribution is the most important part of the analysis in this article. China’s current tax of this adjustment includes personal income tax, property tax and consumption tax. Through the contrast of urban resident’s pre-tax Gini coefficient and after-tax Gini coefficient, we can see that China’s tax adjustment had almost no effect, and even played a counter.Why did China’s tax have no effect? The reason is obviously in the tax itself. but is not confined to the tax system. The primary reason is the tax system outdated unfair design. And we should also note that China’s personal income tax in recent years grew slowly. It was less than7%of total tax revenue. Throughout the world, even developing countries do not have such a low level. So we must find the answer out of tax system. In fact there were many other factors. Because of China’s inadequate tax management, we can hardly collect tax from the high income groups. And the high amount of gray income、hidden income and illegal income were simply not in control of our tax system. So out personal income tax basically became a payroll tax with small amount of income. If these issues won’t be solved, the tax system is unable to adjust the income distribution.