Research On Redistribute Effect Of Special Addition Deduction System Of Individual Income Tax In China

Considering the current social housing pressure,aging population,heavy burden of education and other people’s livelihood issues are prominent,China’s new individual income tax law,which took effect on Jan 1,2019,increases six special additional deductions,including children’s education expenses,continuing education expenses,medical expenses for serious diseases,housing loan interest expenses,housing rent expenses and expenses for supporting the elderly,to ease people’s living pressure.The addition of six special additional deductions reflects the principle of horizontal fairness of taxation,exempting part of tax for taxpayers with heavy family economic burden,thus directly increasing the actual disposable income of taxpayers,and thus reducing their family economic burden.Personal income tax in addition to used to raise financial capital,another prominent feature is to promote the redistribution of income,to ease social inequality,and special additional deduction system serves as an important part of the personal income tax system,research the special additional deduction of the effects of personal income tax redistribution effect has its necessity.In this thesis,the relevant literature at home and abroad was reviewed,and the research methods were summarized.Finally,gini coefficient and MT index were selected as research tools.In addition,using the personal and family information covered by CFPS 2018 database,through certain reasonable assumptions,the information in the database is collated and matched,and finally simulated the specific deduction amount of the other five special additional deductions that taxpayers in the database can enjoy,except for the special additional deduction for continuing education.On this basis,comparative analysis is used to explore the redistribution effect of special additional deduction system.It is found that MT index decreases after the implementation of special additional deduction,that is,special additional deduction weakens the redistribution effect of individual tax.After MT index is further decomposed into horizontal equity effect and vertical equity effect,it can be seen that the horizontal equity effect basically does not change,and MT index decreases because the vertical equity effect decreases.And longitudinal fair effect reduced because special additional removal increased tax effect brought by the more prominent,resulting in a decline in the average tax rate faster,at this time was increased after special additional deduction of K index is rising,but on the whole,the negative impact of tax effect of longitudinal fair effect is greater than the positive effects of progressive tax.The main framework is as follows:Part One:Introduction.By summarizing the opinions and research results of domestic and foreign scholars on the deduction of personal income tax expense and redistribution effect,summarize the current research status and put forward my own views.This thesis expounds the research ideas and methods,and points out the possible innovations and shortcomings of this thesis.Part Two:Theoretical basis.Introduce the theory of deduction of personal income tax expenses before tax,and provides theoretical explanation for how to determine the taxable income of individual income tax from the total pretax income of taxpayers.It describes how individual income tax redistributes income and how the system of pre-tax expense deduction achieves tax progressivity,and proposes the measurement indicators used in this thesis.Part Three:Current situation of relevant systems.This chapter sorts out the development process of individual income tax in China,expounds the implementation effect and existing problems of six additional deductions added in China’s tax reform in 2019,and analyzes the current situation of income distribution of Chinese residents.Part Four:Empirical analysis.Based on the survey data of China Household Tracking Survey(CFPS)2018 database,this thesis simulated and estimated the after-tax income of taxpayers before and after receiving special additional deduction,and analyzed the policy effect of special additional deduction system on income redistribution by using gini coefficient and MT index.Part Five:International experience and suggestions for institutional optimization.In view of the irrationality of the current individual income tax special additional deduction system,this thesis draws lessons from international experience and puts forward some suggestions for improvement.