Filing Individual Income Tax on a Household Basis: Reflections on a New Tax System that Balances Fairness and Stress Reduction
During the 2024 National People's Congress and the National People's Congress, a proposal for individual income tax reform has attracted widespread attention. Zhang Yi, a deputy to the National People's Congress and president of the Institute of Social Development Strategy of the Chinese Academy of Social Sciences, put forward a novel point of view: the individual income tax should be declared on a household basis. This proposal reflects not only a thoughtful view of the current tax system, but also a deep understanding of the current problem of family burdens.
Deputy Zhang Yi's proposal is, in essence, a major innovation in the individual income tax system. Under the traditional personal income tax system, the income of the individual is the tax base, and the integrity of the family as an economic unit is ignored. However, in real life, an individual's economic behavior is often closely linked to the family, and an individual's income and expenditure are often influenced by other members of the family. Therefore, the declaration of individual income tax on a household basis can more truly reflect the actual affordability of taxpayers.
The highlight of this reform proposal is that it balances the twin goals of fairness and stress reduction. From the perspective of fairness, the declaration of individual income tax on a household basis can better reflect the principle of vertical fairness in taxation. Affordability varies between households, with some families having to support their elders and children, while others may not have these burdens. If the tax base is only personal income, then individuals with the same income may face different tax pressures due to different household burdens. Filing individual income tax on a household basis can take these differences into account and make taxation fairer.
From the perspective of stress reduction, filing individual income tax on a household basis can help reduce the financial burden on families. In the current society, with the cost of housing prices, education and other costs, the financial pressure on families is increasing. Especially in some large cities, young couples often have to bear the high cost of housing and children's education. If it is possible to change the filing unit of personal income tax from an individual to a family, then these families can reduce their financial burden through reasonable tax deductions.
Of course, there are also some challenges and problems in filing individual income tax on a household basis. For example, how to accurately calculate the real income of a family? How to prevent tax transfers between households? These issues require in-depth study in the process of reform. However, this does not mean that we should abandon this direction of reform. On the contrary, we should actively face these challenges and ensure the smooth progress of reforms by improving relevant systems and strengthening supervision.
In order to realize the tax reform of individual income tax declaration on a household basis, we need to build a complete and operational institutional system. This includes, but is not limited to, the following:
First of all, establish a mechanism for reporting and verifying household income. This is the basis for reform, which needs to ensure that households are able to declare their gross income accurately and easily, and that tax authorities have the capacity to verify these declarations effectively. With the help of modern information technology, we can develop a first-class declaration platform to achieve real-time update and cross-comparison of data.
Second, clarify household tax exemptions and preferential policies. Appropriate tax deductions should be granted to families who need to support the elderly, raise children, or have other special burdens. At the same time, for low-income families or families with special difficulties, corresponding preferential tax policies should also be formulated to ensure that they will not be burdened by tax reform.
Third, strengthen tax supervision and law enforcement. In order to prevent tax evasion and fraud, we need to increase penalties for tax violations, and build a comprehensive tax regulatory system through cross-departmental information sharing and collaboration.
Finally, attention should be paid to the propaganda and education work of reform. Tax reform involves the vital interests of the majority of taxpayers, so it is necessary to strengthen the publicity and interpretation of reform policies through various channels to improve taxpayers' sense of identity and compliance.
In the process of implementing the reform of declaring individual income tax on a family-by-family basis, we should also fully consider the actual situation of different regions and different family types and formulate differentiated tax policies. At the same time, we should pay attention to the integration with the international tax system, learn from the successful experience of other countries, and constantly improve China's individual income tax system.
In short, the declaration of individual income tax on a household basis is a complex and challenging reform task. However, as long as we adhere to the people-centered development philosophy and fully consider the actual needs and interests of taxpayers, we will be able to build a fair and efficient individual income tax system to provide a strong tax guarantee for the sustained and healthy development of China's economy and society.