Research On Expense Deduction Of Individual Income Tax In China

China’s individual income tax had been imposed in1980and reformed to use classified collective mode in1993.The reformed individual income tax have played a vital role in raising fiscal revenue and regulating income distribution. However, with the development of the economy and personal income source diversified, the gap between citizen revenue is widening. As the shortcoming of the classified collection mode, the regulating function of individual income tax weakens. Although several times of amendment have been conducted to Individual Income Tax Law, it doesn’t turn the situation around. In view of the background, this paper explores the problem of individual income tax expense deduction and proposes a reasonable system design.As the individual income tax reform direction is to establish classified-integrated collective pattern currently, this paper based on China’s national conditions, integrating theory with practice, analysis the overview of expense deduction status, points out problem of the system, researches the expense deduction system of United States, Japan and South Korea to find out our weakness and provide reference and experiences for improving our expense deduction system, from three levels of essential expense, living expense and special expense, design a new deduction system under classified-integrated collective pattern, at the same time link up living expense deduction and CPI, adjust living expense deduction accordingly the CPI fluctuate amplitude, in order to achieve tax fairness and promote the benign development of individual income tax system.