The Ministry of Finance and State Administration of Taxation released a draft of the personal income tax special deduction plan to solicit public opinion from Oct 20 to Nov 4. The comprehensive and classified combined personal income tax law will take effect since Jan 1, 2019, and could benefit Chinese citizens.

The detailed individual income tax special deduction plan has drawn wide public concern, because it deals with the scale of individual tax reduction, which could affect people's livelihood－either positively or negatively.

According to the plan, taxpayers that have to pay for their children's education, self-education or for parental support, or pay housing loan interest or house rent could end up paying lower personal income tax if they report the relevant expenditures to the taxation authorities and get special deductions.

Many experts say personalized taxation system is ideal for a society, for it takes into consideration every individual's and family's actual financial condition. But perhaps no country has an ideal taxation system. The best a country can do is to take individuals' and households' actual financial situation into consideration.

An ideal personal income tax deduction should also be based on every individual's actual financial condition. But that is not possible considering the huge number of taxpayers. So the individual income tax special deduction seems the best solution to the problem.

Fair taxation should improve people's livelihoods. But taxation plays a limited role in solving people's economic and social problems.

In the draft plan, special deduction for the treatment of a serious disease is stipulated as actual medical expenditure above 15,000 yuan ($2,153) a year－with the maximum deduction quota being 60,000 yuan a year.

The procedure for getting special deduction for the treatment of a serious disease will be decided during a taxpayer's final settlement for individual income tax for the year. And a taxpayer has to preserve the original copy and photocopy receipts of the medical expenditures. But for the final settlement, the taxpayer won't be required to submit relevant receipts unless needed to clear any doubts.

This will allow taxpayers to submit photocopies of medical expenditure receipts to get special deductions, because the original copies may be required for medical insurance reimbursement. Still, there is room for improvement, because personal medical expenditure information can be easily accessed through the internet plus medical service system. If the tax collection system is linked with the medical insurance service system, people's medical expenditure information could be easily accessed by the tax authorities as long as the taxpayers provide their ID card number.

Deductions for expenditures on children's education or taxpayers' self-education, housing loan interest, house rent and the expenditure on parents' support are all feasible and practical. But the draft plan doesn't mention the specific procedure for the purpose.

So in the future, the deduction plan should further stipulate that deductions for certain expenditures could be approved by default as long as the taxpayers apply for them. The taxation authorities could require taxpayers to submit further proof when they receive any complaints. This would improve the application and approval procedure for individual income tax special deductions.

The general principle of the draft plan advances to appropriately adjust the scale and standard of special deduction according to the actual financial condition of taxpayers, and their expenditure on children's education, housing loan interest and medical treatment. It could also base the special deductions on the changes in commodity prices, which would meet the public's demand for a better life.

Despite the drawbacks, however, the draft for personal income tax special deduction plan is pragmatic, which is laudable and thus should be welcomed.

The author is a research fellow at the National Academy of Economic Strategy, Chinese Academy of Social Sciences.