On June 26, 2018, China Center for International Economic Exchanges (CCIEE) held the 108th Monthly Economic Talk under the theme of Discussions on Individual Income Tax. Liu Kegu, deputy director of the CCIEE Academic Committee, presided over the meeting. Jia Kang, chief economist of China Academy of New-Supply Economics, Sun Gang, researcher of China Academy of Fiscal Science, and Liu Zuo, vice president of the Research Institute of Finance and Taxation Law, China Law Society, delivered their speeches respectively.
Jia Kang pointed out that the “Individual Income Tax Law of the People’s Republic of China Amendment (Draft)” shows that China’s individual income tax has taken a substantial step toward the combination of comprehensive and classified tax system, which is a major event of the direct tax reform and is in line with the fiscal and tax reform conducted by the central government. He suggested that during the formal deliberation process of the National People’s Congress, appropriate concession should be given to royalties and fees paid for giving presentations so as to protect and maintain the enthusiasm of intellectuals for innovation.
Sun Gang believes that the function of tax should be clarified, which involves the adjustment of the tax threshold, the design of reasonable tax rate, the deduction of additional fees, and the collection and management of individual tax. The further deduction of the additional costs is the highlight of this reform. Although it can alleviate the differences between the different families, it may also create new unfairness. The tax reform needs to be discussed repeatedly, and attention should be paid to the imbalance of individual tax revenue. The collection and management of tax should focus on solving technical problems.
Liu Zuo pointed out that the Individual Income Tax Law of the People’s Republic of China Amendment (Draft) is a major breakthrough as it has improved the regulations of the taxpayers, expanded the scope and tax base of the taxpayers as well as the tax jurisdiction. The tax model is dominated by the general collection and supplemented by classified collection, which can be seen as a huge improvement. He suggested that the tax reform should be carried out in two steps. The first step is to make minor changes, such as adjusting the personal income tax based on relevant investigation and research. The second step is to undertake comprehensive reform, which means to complete the general collection-based program with reference to the corporate income tax legislation.
Liu Kegu believes that the new tax reform should take the current background and trend into account and follow the following principles: to stabilize the macro tax burden and to reduce tax gradually; to reduce the proportion of fees and charges and increase the proportion of tax revenue; to increase the proportion of taxes on the environment, resource and property, to increase local taxes, and improve the management and collection of tax. The tax reform is more comprehensive and effective than before as it has not only launched the “General + classified reform system”, but also proposed the special deductions. However, the reform should clarify the function, status and strategic direction of the new tax reform.
The researchers of CCIEE and its member companies, and staff from other research institutions, media and enterprises also participated in the event.