Comparative Research On Expense Deduction System Of Personal Income Tax In Mainland China And Hong Kong

Expense deduction is one of the personal income tax system the most intuitive features, Mainland's implementation of personal income tax has lasting for nearly 40 years, The personal income of income tax system has been adopted in eleven personal income, and the personal income tax in Mainland is Category Income Tax. In those years, only the expense deduction of wage and salary income had been adjusted for three times, the most recently change has taken place in five years ago, it indicates that expense deduction of the other ten personal incomes had not been regulated any more. In recent years, the personal income tax reform has been the continued voice, but the final reform plan is still inconclusive. Hong Kong early in the last century it was reformed personal income tax expense deduction system, has a mature model in the personal income tax and its expense deduction system.Based on the above reality background, firstly the theory of expense deduction of the personal income tax is analyzed in this article, and then there are a brief introduction about the reform process, the status and the deficiencies in personal income tax expense deduction system between the Mainland and Hong Kong, Secondly this article compared and analyzed the scope, method and adjustment mechanism in personal income tax expense deduction system in Hong Kong and Mainland which showed that Hong Kong's personal income tax have a wider range in the expense deduction, more equitable in the expense deduction method than Mainland. The adjustment of basic allowance in personal income tax expense deduction system did not directly relate to the inflation index in Hong Kong and the mainland of China. Then the article compared the expense deduction in personal income tax and digital indicators, including per capita GDP, CPI, per capita consumption expenditure and the social dependency ratio, which proved that the expense deduction in personal income tax din not have a significant relationship with those factors. Finally the article had a comparative analysis in adjustment mechanism in the tax legislation from both legislative process and citizens'participation in Mainland and Hong Kong. And we found that because of Hong Kong's executive legislative procedure leading, combined with Hong Kong's special budget system, Hong Kong periodically adjust some expense deductions in their personal income tax every year, and the residents have a high attitude to participate it. However, the Mainland citizen participation is not high during the legislative process, also the personal income tax expense deduction did not periodically adjusted, there is a certain lag adjustment continent in Mainland's personal income tax. Through the above comparative analysis, the inspiration of Hong Kong income tax expense deduction reform will help the reform of the personal income tax expense deduction system in Mainland.After a comparative analysis Hong Kong's personal income tax expense deduction system, we can have some recommendations for improvement personal income tax expense deduction system on the Mainland, for example, implementing category comprehensive income tax system, carrying out family tax returns, establishment allowance adjustment mechanisms to increase housing loan interest deduction, reforming supporting measures associated with personal income tax.