Abstract
The immature of the contemporary Chinese individual income tax (IIT) system induce the unjustified wealth redistribution to some extent. This article would not only analysis the relationships between the individual income tax and the wealth redistribution in China, but also positions the defects in the current Chinese IIT system. Apart from that, after referencing the foreign IIT mechanisms and analysis their advanced ideas, the author combines foreign experience with the Chinese native conditions in order to advise for introducing both the classification-consolidated IIT leaving system and the rational deduction system to the current Chinese IIT legal system. The scope of the Chinese IIT is suggested to be wider and the electronic tax leaving and information collection systems would also be the developmental direction of the future Chinese IIT system. All these reforms suggested are beneficial to the fairness of the current Chinese IIT legal system and they would enable the Chinese IIT legal system better achieving its wealth redistribution function.
Highlights
China is going through a period of rapid economic development and the income of both urban and rural residents has gone up sharply
In February, 2013, the Chines state council issued the “Notice of the state council on approving and forwarding opinions of NDRC MOF and MOHRSS on deepen the reform of the system for income distribution”, which gives an official acknowledgment of facing the outstanding problems including the disparity of income distribution, the disorder of the income distribution system, the invisible income and the illegal income in the contemporary domestic mechanism
In order to promote the wealth redistribution function of the individual income tax (IIT), the amended IIT law system should promote the use of banking transfer system in order to better monitor the information of the real revenue and reduce the unfair redistribution caused by the evading of taxation
Summary
China is going through a period of rapid economic development and the income of both urban and rural residents has gone up sharply. It is more realistic to utilize and relay on the redistribution mechanism to adjust the wealth distribution as well as realizing the equity on it. What’s more, China still has not established effective property taxation mechanisms such as housing tax and death duties, which could contribute to the wealth redistribution by levying the existed assets. The income tax mechanism would be the most effective taxation tool for the adjustment of wealth redistribution. There are a bunch of defects and drawbacks in the contemporary Chinese IIT system, which would hinder its target in achieving the equity in the wealth redistribution, and widen the income gap and even in breach of the fairness redistribution doctrine. The third part would try to give suggestions to the current PRC IIT system reformation for the purpose of improving its effectiveness in wealth redistribution
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