The Relevance Principle Of Pre-tax Deduction Of Corporate Income Tax

The reform of fiscal and taxation in China makes the principle of ability to pay become the focus in the field of tax law.Under the principle of net income,the tax base of corporate income tax relies on the determination of taxable income and the determination of pre-tax deduction.As one of the basic principles of pre-tax deduction in corporate income tax,the principle of relevance plays an important role in determining which expenditure can be deducted.Based on the existing system,this paper makes a systematic analysis of the principle of relevance and makes suggestions for the modification and improvement of the existing system.The main content of the article is as follows:Section 1 combs the existing system,indicating problems discovered.Firstly,the history of the principle of relevance and the existing provisions related to the principle of relevance are combed.Secondly on the basis of such result,the problems existing in the provisions are summarized,in order to clarify the research direction of this paper.Section 2 is dedicated on positioning of the principle of relevance.Taking the principle of tax fairness as the starting point,along the path of the theory of taxation,income taxation,net income deduction and pre-tax deduction,we find the position of the principle of relevance in the whole tax law theory and clarify its superior concept.Section 3 analyzes the objects of the principle of relevance.One of the objects of the relevance principle is the generation of corporate taxable income.The second object is the purpose of payment.At the same time,it also discusses the dual purpose of the payment and means of discovering payment purpose.Section 4 discusses the relationship between the two objects.By comparison with the relevance principle in accounting and the correlation relationship in statistics,the relationship between the two objects of the relevance principle should meet requirements of "consistency of direction" and "generality of correlation".Subsequently,this chapter discusses how to determine the direction of corporate taxable income generation and payment purposes,how to judge that the two directions are the same,and what kind of contact between objects is the correlation with generality.Section 5 proposes amendments to the provisions concerning the relevance principle.In view of the current unclear boundary between the relevance principle and the rationality principle,it is recommended to define the different qualitative and quantitative judgment functions in the legislation.Article 27 of the Regulations on the Implementation of the Corporate Income Tax Law could be revised as follows: The expenditure in Article 8 of the Corporate Income Tax Law refers to the expenditure which,for its direct purpose,helped the enterprise to obtain taxable income.The reasonable expenditure referred to in Article 8 of the Corporate Income Tax Law refers to the necessary and normal expenditure that conforms to the normal operation and business activities in terms of the amount and shall be included in the current profits and losses or the related assets costs.At the same time,the meaning of "direct purpose" and "help" shall be clearly defined in the further interpretation of the provision.In addition,the burden of proof for the principle of relevance should be clarified in legislation in order to better implement it.