Corporate income tax and personal income tax rate reduction calls have long been heard. At the national “two sessions” in 2020, the representatives discussed the “tax reduction and fee reduction” and widely recognized the important role of “tax reduction and fee reduction” in the “six guarantees” and “six stability” work. How to reduce taxes? Representatives, as always, expressed some specific views. Now let’s talk about some personal ideas about the three aspects.
Income tax: How much does the tax rate drop?
Lou Jiwei, member of the National Committee of the Chinese People ’s Political Consultative Conference and former minister of finance, suggested that the corporate income tax rate be reduced to 20%, and the personal income tax marginal tax rate can be reduced from 45% to 33%. As soon as this remark came out, it caused a widespread response. Why doesn’t this sound come early? Would it be more feasible for Lou Jiwei to speak up as finance minister? Motivation cannot be discussed. We can only see if it is necessary and possible to do so now.
In fact, there have been many calls for corporate income tax and personal income tax rate reductions. I also raised the view that the two tax rates will be lowered. There is a high degree of social consensus on the tax reduction rate, and what level of controversy it is. The corporate income tax rate has always been reduced to 15%, because high-tech enterprises have already applied a 15% tax rate to many qualified enterprises. Considering that in some places fiscal incentives and other methods actually implement a tax rate of 15% or lower, then a tax rate of 15% is even acceptable. In view of the fact that the most basic function of any tax type is to raise fiscal revenue, lowering the tax rate will inevitably require the corporate income tax to expand the tax base. Simply put, this requires that the preferential tax base be tightened appropriately. R & D expenditure deduction is conducive to innovation, it is necessary, but what kind of expenditure can be regarded as “R & D expenditure”, I am afraid it must be clarified. Otherwise, the income funnel is too large. For different companies, this also means different actual tax burdens.
What is the reason for the maximum personal income tax rate falling to 33%? I do n’t know, but compared to the maximum tax rate of 45%, this is obviously a good thing and is conducive to attracting talent. A country cannot be built without top international talents. I remember that when the personal income tax reclassification and syndrome were collected, many people, including myself, had made suggestions to reduce the maximum marginal tax rate by 45%. Taking into accountRegarding the connection between income tax and corporate income tax, I suggested that personal income tax also implement a maximum marginal tax rate of 25%. The dispute over the positioning of the personal income tax function is stalemate. Some people always want to use a tax to adjust the income gap, but the international tax competition for talents is there. When the dispute is difficult to reach a conclusion, I am even willing to accept even a symbolic tax rate reduction , The highest marginal tax rates of 40% and 35% are acceptable.
From theoretical research to policy practice, a process is inherently needed. In 2020, when the individual income tax is settled and settled, those with multiple sources of income (mostly labor income) will pay more taxes than those with higher income from a single source of income. It may be to lower the tax rate or accelerate the scope of income synthesis. The maximum marginal tax rate for China ’s personal income tax of 45% started in 1980, and the reason given at the time was that the highest tax rate for developed countries was mostly 50-70%. Well, according to this logic, after 1980 in developed countries, the maximum marginal tax rate has generally been lowered. We still stick to the 45% maximum marginal tax rate. Is this still necessary?
VAT: Is the 8% tax rate feasible?
VAT: Is the 8% tax rate feasible?
Jiang Ming, deputy to the National People ’s Congress, suggested simplifying the tax system and merging the value-added tax rate to 8%. The first-grade tax rate does meet the neutral requirement for VAT. This is also the reason why the EU advises member states to do so. But in fact, many countries have to increase a low tax rate on the basis of a basic tax rate. Since the VAT reform, China’s value-added tax rate has continued to be lowered. The current tax rate includes three levels of 13%, 9%, and 6%. According to the reform goals, the tax rate must be degenerate. According to the normal logic of degeneracy, the principle of tax rate adjustment can only be “low is not high”. I think that the tax rates of about 10% and 5% are more in line with national conditions, that is, the tax rate of 13% is reduced to about 10%, and the tax rates of 9% and 6% are reduced to about 5%. This is easy for society to accept. Meet the requirement of gradually increasing the proportion of direct tax revenue. The biggest obstacle to lowering the tax rate is the downward pressure on the economy, and fiscal operations may be severely affected. But this is only a matter of choice of reform timing, not a question of whether the plan is ultimately feasible.
Representative Jiang Ming proposed to implement a tax rate of 8%, which would increase the tax burden of taxpayers who originally applied the 6% tax rate. In this regard, he suggested allowing the service industry to include human resource costs as input deductions. His basis is that the cost of human resources in the general service industry accounts for about 70% -80% of the operating cost. If the 8% tax rate is adopted, the actual tax rate is only 1.6% -2.4%. This is indeed based on the service industry, but the question is what is the essence of VAT