The Standing Committee of the National People's Congress, China's top legislature, is soliciting public opinion on the draft amendment to the Individual Income Tax Law through July 28. The draft amendment responds to not only people's appeal to raise the threshold of individual income tax, but also focuses on gradually building a personal income tax system that is both comprehensive and able to accommodate diversity, which the government has been emphasizing for years.
Several elements stand out in the draft amendment. First, it uses international experience to differentiate resident individuals from non-resident individuals. The draft says a resident individual is one who has lived in China for more than 183 days, compared with the one-year period previously, and thus expands the jurisdiction of the tax authority.
Second, it imposes a unified tax rate on incomes from various sources, including salary, remuneration and royalty, taxing an individual's annual income instead of monthly income. This means the reform is aimed at building a new personal income tax system that takes into account both separate income sources and the total income of an individual.
Third, the draft amendment optimizes the tax rate structure, remarkably lowering the tax burden of low-and medium-income groups (individuals who pay income tax below the 25 percent rate). But it reduces only slightly the tax burden of high-income individuals (those in the 30 percent, 35 percent and 45 percent tax rate brackets).
However, as part of the comprehensive imposition of tax on various sources of incomes, some taxpayers whose remuneration and service fees account for a majority of their individual or household income (such as senior experts and intellectuals), may have to pay much more as income tax because their remuneration and service fees will be subjected to different tax rates.
And although the five-level progressive tax rate targeting the incomes of businesses remains unchanged, the threshold of the highest tax rate has been increased from 100,000 yuan ($14,996.42) to 500,000 yuan, remarkably reducing the tax burden of businesses run by individuals and contractors.
Fourth, the draft amendment raises the threshold for personal income tax from 3,500 yuan a month to 5,000 yuan a month (or 60,000 yuan a year), reducing the tax burden of low-and medium-income groups.
Fifth, the draft also allows deduction of special expenses such as children's education, treatment for serious diseases, and payments of mortgage interest and rent from the taxable income of individuals. This will make China's individual income tax adjustment more differentiated, targeted and reasonable, promoting a fair tax system.
The draft amendment also has more clauses on anti tax evasion, which will help the tax authorities to better manage the individual income tax system. In other words, the draft amendment truly facilitates tax reform.
In the next stage, the top legislature could discuss whether some preferential tax rates could be imposed on incomes such as remuneration and lecture fee, in order to show the country attaches great value to learned people and intellectuals.
Still, some people are worried that if China's top legislature approves the draft amendment, the government's fiscal revenue would drop.
Individual income tax accounts for less than 7 percent of China's overall fiscal income. So even if the tax reform puts some pressure on China's fiscal revenue in the initial stages, in the ultimate analysis it will not have a huge impact on the fiscal revenue if the authorities manage to build a sound taxation system.
Moreover, the socio-economic trend is one of rising individual incomes. And if individuals' incomes continue to increase, the amount of personal income tax collected will also increase, offsetting the pressure created by a possible reduction in tax revenue owing to the personal income tax reform.
The author is chief economist with the China Academy of New Supply-side Economics.
（From China Daily 2018-07-04）
賈康介紹
第十一屆、十二屆全國政協委員、政協經濟委員會委員，華夏新供給經濟學研究院首席經濟學家，中國財政科學研究院研究員、博導，中國財政學會顧問，中國財政學會PPP專業委員會主任委員，國家發改委PPP專家庫專家委員會成員，北京市等多地人民政府諮詢委員，北京大學等多家高校特聘教授。1995年享受政府特殊津貼。1997年被評為國家百千萬人才工程高層次學術帶頭人。曾受多位中央領導同志邀請座談經濟工作（被媒體稱之為“中南海問策”）。擔任2010年1月8日中央政治局第十八次集體學習“財稅體制改革”專題講解人之一。孫冶方經濟學獎、黃達—蒙代爾經濟學獎和中國軟科學大獎獲得者。國家“十一五”、“十二五”和“十三五”規劃專家委員會委員。曾長期擔任財政部財政科學研究所所長。1988年曾入選亨氏基金項目，到美國匹茲堡大學做訪問學者一年。2013年，主編《新供給：經濟學理論的中國創新》，發起成立“華夏新供給經濟學研究院”和“新供給經濟學50人論壇”（任首任院長、首任秘書長），2015年-2016年與蘇京春合著出版《新供給經濟學》專著、《供給側改革：新供給簡明讀本》、以及《中國的坎：如何跨越“中等收入陷阱”》（獲評中國圖書評論學會和央視的“2016年度中國好書”），2016年出版的《供給側改革十講》被中組部、新聞出版廣電總局和國家圖書館評為全國精品教材。2017年領銜出版《中國住房制度與房地產稅改革》、《新供給：創新發展，攻堅突破》、《構建現代治理基礎：中國財稅體制改革40年》等。根據《中國社會科學評估》公佈的2006～2015年我國哲學社會科學6268種學術期刊700餘萬篇文獻的大數據統計分析，賈康先生的發文量（398篇），總被引頻次（4231次）和總下載頻次（204115次）均列第一位，綜合指數3429，遙居第一，是經濟學核心作者中的代表性學者。
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