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A professor also a high ranking government official, Li Daokui, said,|
Chinese income tax system has widen the wealth gap. It's utopia to regulate the income redistribution by the present income tax system.
The backgroud of China
The major income wealth difference comes from the investment of assets.But the tax is different. For example, the house rental tax is only 5%, but wages tax is high and is collected by progressive tax.
Chinese high income family usually don't get the monthly salaries. Entrepreneur, lawyers, accountants can manipulate and transfer avoid the income tax. If the tax was heavy, actually, none of income tax is collected from these faimlies, but at last only Chinese family who get monthly salalries pay the tax, and this lead to inequality.
The same time, owing to the unhealthy system and unhealthy social welfare, it is prevailing for Chinese to escape from the income tax with great dignity. In the end, Chinese who receive the fixed monthly salaries pay tax, and Chinese who get free money escape the tax. The income redistribution is deteriorated.
Chinese present income tax have copied from the progressive tax of U.S style.But Chinese social foundation doesn't support such system. In U.S, income tax dominated the financial revenue. But in China, the tax from state-own companies, the mine, the land dominated the financial revenue. China need to practice flat tax like Russia, Singapore, Hongkong.
All of income need to pay the same tax, including the investment income, the divendend income, and other income beside labor work income.
The reform don't need to change overnight. Chna could set up a low flat tax rate, later improving step by step. For example change the present 7 levels to 3 levels, like 5%, 10%, 15%, several years later, only one level. China could trial in one province, or one city, or one district.