Research On The Optimization Of The Special Additional Deduction For Individual Income Tax

The 5th Meeting of the Standing Committee of the 13 th National People’s Congress was held on August 31,2018,on which the amendment of the Individual Income Tax Law have been approved.A deduction of 5000 yuan have been allowed for expenses.Income from wages and salaries,remuneration for personal service,author’s remuneration,royalties need to be paid as comprehensive income.The tier of 3%～20% tax rate have been expanded,the tier of 25% tax rate have been narrowed.At the same time,the children education expenses,the continuing education expenses,the serious illness medical care expenses,the housing loan interest expenses,the housing rent expenses,the elderly supporting expenses,the baby care expenses can be deducted before taxing.The Individual Income Tax have been reformed 7 times since it was levied in 1980.Under the background of tax and fee reduction,focusing on people’s livelihood issues of social concern such as education,medical care,housing and pensions,the establishment of the Special Additional Deduction is the shining point of the recent Individual Income Tax reform.The implementation of the Special Additional Deduction for Individual Income Tax was in 2019,the following issues are the research focus of this thesis.What about the tax reduction effects? Who are the beneficiaries? What kind of problems existed? How to optimize?The main research method of this thesis are as follows.Firstly,the literature research.We need to find the the related domestic and foreign literature and material,so we can comprehensively understand the history and current situation of the Special Additional Deduction for Individual Income Tax.And we also need to summarize the relevant theoretical research results that have been obtained by domestic and foreign academic circles,so we can refer to them when we conduct our own research.Secondly,the questionnaire survey.Questionnaires have been released on the Questionnaire Star platform to conduct surveys to obtain the first-hand information of taxpayers’ income in 2020,tax payment,and the tax reduction of the Special Additional Deduction for Individual Income Tax,which have been used to calculate the tax reduction effects of the Special Additional Deduction for Individual Income Tax.Thirdly,the inductive summation.According to the current situation and existing problems of the Special Additional Deduction for Individual Income Tax in China,we can generalize practical experience from Individual Income Tax expense deductions in other countries,and propose further optimizing suggestions for improving relevant policies and management measures.The result of the tax reduction effects calculation show that the tax reduction of the Special Additional Deduction is stronger,the middle and high income taxpayers,the young and middle-aged taxpayers are the biggest beneficiaries.In terms of tax reduction scope,over40% of the taxpayers have been benefited.In terms of tax reduction amount,the average tax reduction is 2,859.67 yuan.In terms of tax reduction proportion,the average tax reduction proportion is 59.73%.In terms of income,if the income of taxpayers increases,the average tax reduction increases also,the tax reduction proportion increases first and then decreases,and the tax reduction proportion of the middle and high income taxpayers is the largest.In terms of age,the average tax reduction of the 26-35 age taxpayers is the highest,and the average tax reduction proportion of the 36-50 age taxpayers is the highest.The Special Additional Deduction for Individual Income Tax have not been implemented for a long time,there are still some system loopholes and management loopholes in policy formulation or tax administration.More efforts are needed to plug the loopholes and fill the gaps.We can learn the practical experience from other countries based on the actual situation of our country.And we need to continuously optimize the current Special Additional Deduction policy and improve the management system,so the positive role of Individual Income Tax in improving the income distribution system,protecting and improving people’s livelihood,and stimulating residents’ consumption potential will be better played in the future.