The development process of tax reform in China
Introduction
The issue of finance and taxation is the core issue of modern national governance, and the modernization of tax system is closely related to the modernization of the country. This paper reviews the effect of the full implementation of value-added tax reform, individual income tax reform from classification to comprehensive reform, as well as resource tax, environmental protection tax reform and other “three taxes” reform in ten years, discusses the historical transformation of China’s tax system from traditional tax system to modern tax system, and analyzes the impact of China’s tax reform on implementing new development concepts and building a new tax system pattern. The importance and far-reaching impact of promoting China’s economic transformation and upgrading, equitable income distribution and high-quality development; On this basis, it further discusses how to follow the essential requirements of Chinese-style modernization and how to serve high-quality development by tax reform, and how to serve Chinese-style modernization by tax modernization.
The path and function analysis of tax reform
China’s tax modernization reform started late, but it has made great achievements. The comprehensive implementation of value-added tax reform, individual income tax reform from classification to comprehensive reform, as well as resource tax, environmental protection tax reform and other “three taxes” tax system reform, not only promoted the historic transformation of China’s tax system from the traditional tax system to the modern tax system, but also for China’s new development stage of economic transformation and upgrading, fair income distribution and high-quality development has a vital role and far-reaching impact. At present, the emphasis on the social adjustment function of tax needs to be strengthened, and the theory of tax system, tax structure, tax design, tax principles and other aspects need to be further reformed and optimized.
As early as 1984, China tried value-added tax on some products. Subsequently, in the context of tax sharing reform, after eliminating the product tax that led to double taxation in 1994, China levied value-added tax and business tax respectively on the sale of industrial and commercial goods and the provision of labor services in the service industry, and implemented the transformation reform from the production value-added tax that cannot be deducted by equipment to the consumption value-added tax that can be deducted by equipment in 2008. In order to solve the contradictions and problems of double taxation and increased tax burden caused by the application of different tax systems for goods and services, the executive meeting of The State Council in 2011 decided to take the lead in replacing business tax with value-added tax (hereinafter referred to as replacing business tax with value-added tax) in Shanghai from January 1, 2012 on the transportation industry and some modern service industries that were originally subject to business tax. On May 1, 2016, the reform to replace business tax with value-added tax was fully implemented nationwide, business tax was cancelled, the pilot scope was extended to the construction industry, real estate industry, financial industry, and life service industry, and the value-added tax included in all new real estate of enterprises was included in the scope of deduction, ensuring that the tax burden of all industries was only reduced and not increased, thus completing the historic reform of replacing business tax with value-added tax.
After the full implementation of the replacement of business tax with VAT, in order to cope with the complex and changeable domestic and foreign environment under the new situation, China further implemented large-scale and sustained tax reduction and fee reduction policies, of which VAT reduction and tax rebate have played a huge role. Since April 1, 2019, the VAT withholding tax refund system has been piloted, and the incremental tax withholding tax credit for taxpayers is refunded in whole or in part. In 2022, the VAT tax refund policy will be further strengthened, and all tax refund funds will be directed to enterprises, so that enterprises can enjoy the VAT refund dividend.
The individual income tax reform has promoted the realization of common prosperity
At present, the social adjustment function of China’s personal income tax is not obvious, which is not conducive to the adjustment of the rich and the poor and the benefit of the people through taxation. Adhering to the concept of sharing and common prosperity is the ultimate goal of our country’s economic and social development and social progress. With the development of economy, the income level of Chinese residents has increased, the accumulation of social wealth has increased, and the contradiction between the difference of income level and the difference of property possession has become more and more prominent. Therefore, it is urgent to promote the reform of individual income tax from classification to classification and comprehensive taxation, and the combination of basic and special expenses deduction, so as to reduce the tax burden of low – and middle-income groups, promote fair income distribution, and achieve common prosperity.
For a long time, China’s individual income tax has been implemented with the individual as the tax unit to carry out the standard deduction of expenses, and the paying unit to withhold and pay the classified individual income tax. Although this method has the advantages of simple collection and management, the prominent problem is that the basic expense deduction can not objectively reflect the actual living expenses of different individuals, and the classified collection is easy to cause the tax burden imbalance between individuals with a single income and multiple incomes, and between individuals with different burdens, so that the individual income tax can not be truly realized and levied. To this end, China has in 2005, 2007 and 2011 carried out individual income tax amendments, but limited to the actual conditions of collection and management, the reform of individual income tax according to inflation and personal basic living expenses needs, the implementation of the corresponding reform to increase the personal income tax deduction standard as the main content.
Since October 1, 2018, China has first increased the exemption amount of wage and salary income under the classified tax system model, applied the new tax rate, reduced the burden on residents, and released the tax reduction dividend of individual income tax reform in advance. Since January 1, 2019, the newly revised Individual Income Tax Law has been officially implemented, marking the transformation from traditional individual income tax to modern individual income tax. The personal income tax reform reflects the successful experience of China’s personal income tax system reform integrating the domestic and foreign reforms, is of milestone significance, effectively cracked the personal comprehensive income tax collection and management problems, and fully reflects our country’s increasing tax governance ability and comparative advantages.
The new trend of deepening the reform of the “three taxes” tax system
The socialist system determines that every adjustment of the tax system is people-centered, takes the protection of the people’s interests as the priority, and is consistent with the policy and practice of tax modernization, which is the essential requirement and important content of the tax system with Chinese characteristics. Starting from reform and opening up, China’s modern tax reform has gone through several stages: profit tax reform, tax sharing system and modern tax system reform. In the guiding ideology and principle of taxation, it has experienced a change from emphasizing the concept of raising fiscal revenue through taxation to gradually paying attention to and emphasizing the social redistribution function of taxation, and gradually attaching importance and urgency to optimizing the tax structure, gradually increasing the proportion of direct taxation and strengthening the rule of law of taxation.
China’s tax reform highly emphasizes and pays close attention to tax theory, tax structure, tax use, tax rule of law, and the social function of modern taxation to adjust the rich and the poor and benefit the people. Adhering to the basic principle that taxation aims to promote social fairness and justice and improve people’s well-being, China strives to build a modern tax theory with Chinese characteristics and thoroughly implement the people’s nature of taxation. This is the fundamental difference between the modern tax system with Chinese characteristics and the British tax system.