More important than the levy point is tax fairness
Text / Yan Xiaofeng
Issued in the 987th issue of China News Weekly on March 15, 2020
Taking stock of the tax reform in the past ten years, the threshold was adjusted from 3,500 yuan (2011) to 5,000 yuan (2018). During the same period, housing prices and prices continued to rise, and there were constant calls for higher thresholds.
The difficulty is that the per capita income and consumption levels are different in different regions, and the number of people who support each family is different. How can these problems be solved by raising the threshold?
Therefore, compared to raising the personal tax threshold, the more critical issue is how to achieve fair personal tax.
First of all, the tax threshold should be appropriately increased in line with economic development, income levels and rising prices, which of course should be.
Secondly, the individual tax reform cannot only target the wages of “hitting workers”. It must include investment income, labor remuneration, hidden income, etc., if certain groups’ investment income or dividends, labor income, appearance fees, endorsement fees, etc. If it is not included in the scope of collection, it is difficult to reflect the fairness of individual taxes.
Finally, and most importantly, it is necessary to return the personal tax reform to the "wealthy tax" standard, and strengthen the supervision and collection of wealthy groups, so as not to reduce the personal tax to "payroll tax" and "middle class tax."
Personal tax reform affects thousands of households, and it is also related to social equity.
Here, we might as well seek reform directions according to the following three ideas:
First, in view of income levels and rising prices, the threshold should be increased year by year, but the differences in economic development and income and consumption levels in various regions should be taken into consideration.
Individual taxes are originally local taxes, and it is impossible for the whole country to be a game of chess.
For example, Beijing’s per capita income is three times that of Yunnan’s, but the two places have implemented the same threshold. This is unreasonable, and local governments must be given certain policy-making authority.
Therefore, it is recommended that the authority to formulate the threshold should be delegated to the local authorities, and the central government should play a guiding and supervisory role.
Second, the new tax will provide preferential subsidies to families in real need, such as deducting mortgage interest, reducing the burden of buying houses for those in need, and deducting children’s education expenses, and support for the elderly. This aspect should also be tailored to local conditions. The power to set standards for deductions and subsidies is delegated to local governments, and the central government should also do a good job of supervision.
This is because the same deduction and subsidy standards do not apply to the two “workers” with the same income because they are located in Beijing and Yunnan.
The new tax should also consider regional differences.
In addition, the tax reform in 2019 has expanded the tax rate range of 3%, 10%, and 20%, which has substantially reduced the tax rate and reduced the tax burden of low- and middle-income individuals.
In the future, it is possible to optimize the range of tax rates and adjust tax rates in accordance with local conditions, so as to better enhance the locality, accuracy and effectiveness of individual tax adjustment income gaps.
Third, the tax collection should be directed at the wealthy, rather than at the wage earners as it is now. Reform in this area is a top priority.
How to "relieve the poor", "expand the middle" and "raise the increase" of the personal tax reform, focusing on "pumping fat and replenishing weight" and "secondary distribution", has always been a major problem.
Taxing the rich is a big problem globally.
First, because wealthy groups allocate assets globally, if there is no global tax calculation system, it is inevitable that information is asymmetry and it is difficult to effectively collect their personal taxes.
The second is that some wealthy people have a lot of tricks, "money is in the enterprise, and they don't get wages." Compared with a large number of real estate, stocks, insurance and other assets, their wages are only a fraction of the nines.
These have become loopholes in tax collection.
Western experience can be used for reference. First, the establishment of a global collection system, wherever income must be paid to the country; second, the tax commissioner must closely monitor the consumption behavior of the wealthy like private investigators, and once they find that their high consumption and reported Investigate if the income does not match.
In addition, in the face of more and more corporate executives choosing low salaries, the tax department also requires them and their companies to levy taxes on their annual dividends.
In short, if the personal tax reform is to reflect social equity, it must not only focus on raising the threshold, but also adjust the income gap through secondary distribution, and return the personal tax to the "rich tax" standard.
In addition, taxpayers must pay more attention to government revenue and expenditure and actively participate in social governance.
China News Weekly, Issue 9 of 2021
Statement: The publication of the "China News Weekly" manuscript is authorized in writing