Income tax reform must progress in phases

The goal of individual income tax reform is to establish an income tax system that combines classified and comprehensive taxation systems. The current classified individual income tax system levies different kinds of taxes. It is convenient to manage, and it is easy to levy tax as it is deducted at source-for example, an employer deducts an employee's income tax while paying his/her salary.

The problem with the classified income tax system is that different taxes can be imposed on different sources of incomes even if the amounts of incomes are the same. Also, the system doesn't consider the actual burdens of individuals and their families, which may lead to unfair taxation.

Levying income tax based on a family unit makes taxation fairer because it considers the financial condition of the entire family, as opposed to only an individual. Based on China's actual situation, levying income tax based on family incomes would require the tax department to have full information on Chinese families and to process it well. But the government does not have complete information on all families. Besides, processing the information may be a problem for the tax department.