Illustration: Luo Xuan/GT

The topic of reforms related to personal income tax has again caught the public's attention. According to a news report by Legal Daily on November 18, the Financial and Economic Affairs Committee of the National People's Congress (NPC) of China suggested that relevant authorities should give consideration to the proposals by some deputies in the third session of the 12th NPC held in March this year relating to the Individual Income Tax Law and the threshold for levying personal income tax.

Some deputies proposed that the threshold for personal income tax should be raised, as the Individual Income Tax Law, which was amended in 2001 for the sixth time, did not take into account those who receive income other than from regular salaries and lacked relevant articles on international taxation such as ways to curb tax avoidance. 

When it comes to discussions of personal income tax reform, the threshold for levying the tax is always brought up. This is because if we look at the achievements in the reform of personal income tax in recent years, nothing seems to have changed apart from the threshold.

This time, apart from the suggestion by the Financial and Economic Affairs Committee that triggered vigorous discussion on the reform of personal income tax, debate on the issue was also inspired by the central government's decision to allow all Chinese couples to have two children, as it could potentially lead to families facing a greater financial burden. It's a further reminder of the urgency of personal income tax reform.

There is one misunderstanding that should be addressed. Since the relevant authorities always seek feedback in adjustment of the threshold, people tend to stick to the delusion that the threshold is the key factor in personal income tax reform. This is not the case. In fact, the threshold is just one component of China's personal tax system - a comparatively important and sensitive component, but not the key element. The crucial issue in reform of the personal tax system is the need to promote fairness in wealth distribution. Under the current system, the opacity of personal incomes, the underdeveloped credit reporting system, and the blurred line between personal income tax and corporate income tax have all impacted social equality.

It should be noted that not enough has been done to improve a system that is so closely linked to people's livelihoods. Instead of trying to identify the key problems, undertaking comprehensive and in-depth analysis, and setting up a regulated and effective mechanism for the personal tax system, the relevant authorities have tended to act only when put under pressure by public demands. Their actions have been more like treating the symptoms instead of correcting the underlying cause of the problem.

It is true that if the threshold is lifted for personal income tax, it will help to boost people's real income. But it won't change the fact that some families will still face an unfair situation, with some just above the threshold and others just below it.

Why not try to explore the possibility of levying personal income tax on a family basis? This method would be feasible because for the working class, wage tax is the biggest part of their income tax, so the relevant authorities should have a fairly complete database. Besides, as the credit reporting system continues to improve, certain problems will be resolved eventually.

Some experts have suggested an adjustment in the personal income tax so that it is pegged to the consumer price index (CPI), as that would allow people's income to rise more quickly than inflation. But that would not make things easier for people who have been laid off or who do not have an income. Also, it would not address the underlying issue of the need for social equality and fairness. In comparison, levying personal income tax on a family basis would be more fair. A concrete reform plan for personal income tax that is adapted to the popular will is urgently needed.

The author is an economic commentator. bizopinion@globaltimes.com.cn