Contributing to the Individual Income Tax Reform Debate in China: Is Family Based Filing of Individual Income Tax Returns a Feasible Solution to the Social Problems Arising from the Increasing Family Income Inequality in China?


  • Eva Huang
  • Xi Nan


China’s new wave of Individual Income Tax Reform is currently hotly debated. The Finance Minister, Lou Jiwei was reported to say that the relevant government departments in China – the State Council, the Ministry of Finance, and the State Administration of Finance had worked out a reform plan together in 2015. One goal of this plan is to move China’s scheduler individual income tax to a global structure, and to put in place policies that contribute to income redistribution that takes into consideration family related expenditure, such as looking after the elderly and childcare.
A review of the literature shows that Chinese scholars and commentators suggest that China could learn directly from the US, adopt their global income tax system and allow family based filing of individual income tax returns. The literature does not provide reasons for this suggestion.
This paper performs a feasibility study to assess whether China could adopt the suggestions proposed by the prevailing literature. The study is performed based on a “revenue neutrality” analysis that compares projected revenue from existing policies, and that collectable if China allows family based individual income tax filing.
Results from a pilot study reports that the projected revenue from allowing family based individual income tax filing would be at a level that is closer to 40% of revenue collectable if China does not allow family based individual income tax filing. This result suggests that policy makers in China need to take careful considerations of costings before proceeding with the