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Make the rich pay more tax

(China Daily)
Updated: 2009-05-13 07:46

The core issue of individual income tax policy is which social class bears the heaviest tax burden. Although overall strengthening of tax collection is necessary, it does not deal with the root cause of the taxation problem, says an article in Qilu Evening News. Excerpt:

The National Taxation Head Office has just issued a circular to strengthen tax collection, aimed at monitoring the breakdown of people's salary and enhancing general supervision of the levying of income tax. This practice is indispensable in reducing tax evasion, but still far from resolving the essential tax problem.

The bottleneck of the domestic individual income tax system is more than a low threshhold of collection. The key points are the absence of a sound structure embodying the principle of fairness and the resulting imbalance in distribution of the tax burden.

In the US, the salaried people who cover half of the gross population account for only 5 percent of the federal tax revenue, while the top 10 percent high-income people contribute over 60 percent of the gross revenue, including the top 1percent who shoulder more than 30 percent.

In contrast with this inverted-pyramid structure, the high-income people in China- who are 20 percent of the population -bear less than 10 percent of the tax burden. Due to this unbalanced structure, the single-minded pursuit of overall management of tax returns cannot resolve the fundamental problem.

Actually the income of salaried people is very transparent and the tax revenue generated is no cause for complaint.

On the other hand, the impact of the tax-gathering machinery on the high-income section is limited because of tax evasion and the fact that the wealthy people's sources of income are diverse and hidden.

Any modification of the individual income tax policy should attach more importance to the function of adjusting income distribution.

Our first priority should be to learn from the internationally accepted practices and enhance the transparency of individual income and payment of tax, and making visible the tax policy's underlying principles of social fairness and justice.

(China Daily 05/13/2009 page8)