The Combination Of Comprehensive And Schedular Personal Income Tax Systems:China’s Option

Personal income tax is a general means that plays a great role in incomedistribution for every government. However, the present income tax system is theschedular tax system in our country, which leads to the weakness of distributionfunction and income loss. The central government proposed to adopt thecomprehensive and schedular individual income tax system in the ninth five-year plancompendium,then proposed again in the tenth and eleven five-year plancompendium.In2011, the reform of comprehensive and schedular personal incometax system has been again written in the twelve five-year plan compendium.Butsubstantive progress hasn’t made in designing and implementing the new taxsystem,and many issues are still controversial.The paper will make research in those controversial problems,including:is thecomprehensive and schedular tax system the ultimate goal,or just a temporarymeasure? What are the types of comprehensive and schedular tax system in othercountries?How do the different income categories combinate with each other? Whendesigning the tax system, people always focus on fairness, ignoring economicefficiency and administration efficiency. Therefore, it is necessary to select the taxsystem from the aspects of efficiency and fairness.The paper draws two main conclusions.First, in the background of economic globalization, the trend in OECD countrieshas been turning from the comprehensive into the comprehensive and schedular taxsystem. From the view of fairness, the comprehensive tax system is doubtless the goal.However, economic globalization has greatly enhanced the mobility of capital,andmany countries have to levy low rates on it.Also because of the difficulties inpratice,no countries use a pure comprehensive tax system.The taxation trend in theworld has became the comprehensive and schedular tax system.Second, China should adopt the semi-dual income tax system. There are differenttypes of comprehensive and schedular personal income tax systems in OECDcountries, including the semi-comprehensive income tax system, the dual incometax system and the semi-dual income tax system.All these tax systems possessstrengths and weaknesses,providing important practical significance. Consideringboth fairness and efficiency, the suitable tax system for China is the semi-dualincome tax system.It divides the eleven incomes into three categories: type1is thelabour income(wages and salaries, remuneration for personal services, author’s remuneration); type2is the capital income (interests and dividends,royalties,incomefrom lease of property, income from transfer of property,contingent income); type3is the business income (income from production or business operation derived byindividual industrial and commercial households, income from contracted orleased operation of enterprises or institutions, income from sole proprietorship orindividual partnership, income derived by individuals from engagement inprofessional services activities). At last the paper puts forward concrete measures ondesigning the tax elements to provide practical suggestions for personal income taxsystem.