Fairer income tax

The central authority is proposing to initiate a networked database of personal information as a move toward collecting income tax on a household basis.

This is a significant step forward in tax reform, related to the interests of all taxpayers as well as the healthy development of society and public governance in China.

The current individual income tax is levied on the income of individuals. Wage earners have no choice but to pay tax on every penny they earn above the tax threshold if their wages are their families' only income source. But the more income sources people have, the more chances there are for them to evade tax.

Although income tax thresholds have been raised and tax rates altered time and again to relieve the tax burden on low-income groups, they have failed to make the national revenue distribution fairer.

This system also does not take taxpayers' real financial burdens into account, for example if they have children and a mortgage.

An income tax on families would take taxpayers' financial burdens into account and refund tax to poor people according to the financial status of the family.

Some countries established a family-based income tax as early as the 1910s, long before there were any computers. If the authorities concerned perform their functions well, even the migrant worker population should not pose any difficulty.

The administrations of social security, education, health, transportation, banking, housing and public security, etc, should be networked and share their information. In this way tax departments will be able to verify the real financial status and taxable income of individuals and families and the income tax can effectively narrow the wealth divide.

Such information would also serve as a reliable and dynamic reference system for decision-makers to make well-targeted and efficient decisions and bring unprecedented convenience to residents' life.

A household-based income tax system has been practiced in many other countries for years, demonstrating considerable adaptability and rationality. Adopting such a tax in China would not only make income tax function better, it would also help promote a transparent and fairer society.

It rests with the central authority to show its resolution to push forward this crucial action.

(China Daily 03/29/2012 page8)