The individual income tax declaration may not be promoted
smoothly unless more substantial reforms are made to the tax system
itself, says a signed article in Guangzhou Daily. An
excerpt follows:
The State Administration of Taxation requires those with an
annual income of more than 120,000 yuan (US$15,480) to declare
their personal income tax to the taxation bureau between January 1
and March 31.
Although the deadline is just days away, only a minority have so
far complied.
About one-fourth of those who should make the declaration in
Beijing have done so, and no more than 300 people have filled in
the declaration forms in all of Gansu Province.
The declaration requirement is designed to collect detailed
information on taxpayers. Yet, this goal is not reached when it
lacks public support.
Such opposition originates from the defects in the scheme itself
and the ways of promoting it.
The nation has expected too much from the individual income tax,
with the majority expecting a narrowing of the income gap and
redistribution of resources among different social groups.
The individual income tax, mainly collected from employed people
in urban areas, is unlikely to have significant effect in bridging
the income gap because the gap is primarily produced by income
difference between urban and rural residents.
Citizens pay a progressive income tax ranging from 5 to 45
percent.
As the rich are more highly taxed, they have stronger incentives
to evade the taxes instead of paying taxes to aid the government in
helping the poor.
It is necessary to change the progressive tax rate to encourage
all to pay their taxes according to the law. A successful precedent
is found in Russia, which abandoned its progressive tax rate for a
uniform tax rate for all individuals. The Russian government saw an
increase in income tax returns, with citizens more compliant in
paying taxes.
(China Daily March 22, 2007)