Research On The Income Distribution Effect Of Operating Income Into Comprehensive Income In Individual Income Tax

The 2018 new personal income tax reform in China has achieved a transformation of the tax system model,proposing the inclusion of four income categories: wages and salaries,labor remuneration,manuscript remuneration,and franchise royalties in the comprehensive income tax system.In the 14 th Five Year Plan,China also clearly proposed the planning goal of "improving the personal income tax system" and proposed the reform task of "promoting the expansion of the scope of comprehensive income tax collection".The 20 th National Congress of the Communist Party of China proposed to standardize the order of income distribution and the mechanism of wealth accumulation,aiming to improve the income distribution system and promote social fairness.At the same time,with the vigorous development of digital technology and the application of technology empowerment and information management,China’s tax management capabilities and tax collection experience will also be significantly improved.Based on this,in order to explore the degree of achievement of income distribution effectiveness,this article explores a feasible path to include operating income in the scope of comprehensive income taxation from a theoretical and empirical perspective.After theoretical research,it has been found that narrowing the income distribution gap has become the main starting point for the current system development in China.Personal income tax is an important tool for regulation,and the formulation of tax elements directly affects the effectiveness of income distribution regulation.The application of different tax systems directly affects the efficiency and fairness of regulation.Through necessity analysis,it is shown that the Gini coefficient of China’s income distribution index has been maintained in the range of 0.4 to 0.59 for a long time,which is in a relatively large level range.And the new personal income tax regulations still use the classified income tax system for operating income,which leads to issues such as inconsistent income and tax burden,and competition with the labor remuneration tax items in comprehensive income,which contradicts the principles of tax fairness and capacity based burden.Based on necessity analysis,the feasibility of incorporating business income into income distribution was explored,and it was found that the measure of incorporating business income into comprehensive income is feasible at the legal,economic,tax collection management,and international reference levels.In addition,this article uses empirical calculations and micro data from China Household Finance Research(CHFS)to set up two simulated tax systems.By comparing with the original tax system,it analyzes income distribution indicators such as MT index and its decomposition formula,K index,etc.under different tax systems.It is calculated that incorporating operating income into comprehensive income significantly improves income distribution effectiveness.Based on the above argument and analysis,by comparing the data before and after the establishment of the comprehensive income tax system,it is confirmed that the application of the comprehensive income tax system has a positive effect on income distribution compared to the single classification income tax system.In addition,by comparing the income distribution effects before and after incorporating operating income into comprehensive income,it is confirmed that at the level of achieving income distribution effects,incorporating operating income into comprehensive income enhances the horizontal fairness,vertical fairness,tax progressivity,and average tax rate of individual income tax,promoting the realization of income distribution effects.Therefore,after demonstrating the effectiveness of the measures,this article follows the implementation path of incorporating operating income into comprehensive income,attempting to start from the design of tax entities and procedural rules,subsequent supporting facilities,and taxpayers’ enthusiasm.The management of expense deduction,tax declaration,and collection should be closer to comprehensive income management,while improving the laws of industrial and commercial management,tax service platforms,and smart tax construction,Reduce the obstacles to incorporating business income into comprehensive income,use ethical and credit constraints to enhance taxpayers’ enthusiasm,and provide useful insights for promoting the expansion of comprehensive income.