It will take a long time to establish an all-round comprehensive income tax system. For the time being, the authorities could accelerate the merger of different kinds of labor incomes, such as salaries and remuneration for labor, to collect tax using the same method. In the process of merging various income taxes, however, the tax department should also balance the different rates of various taxes.

But even when the comprehensive income tax system is finally established, it will be impossible to stop deducting tax at source. For individual income, the employer has to be responsible to deduct and pay tax for the taxpayer, as deducting tax at source is the first line of defense in the collection of individual income tax.

The system of declaring individual income is also an important part of individual income tax collection and management. The tax department launched pilot projects in 2007 requiring individuals whose annual income is more than 120,000 yuan ($18,414.79) to declare the tax themselves. Taxpayers will be punished according to the law if they are obliged to declare their individual incomes but fail to do so. Taxpayers should know that only when they declare their individual incomes will they be able to enjoy preferential tax policies.

The authorities implementing the individual income tax reform should also consider the difficulties of levying tax. Since many cash transactions are difficult to track, reducing cash transactions as much as possible is an effective way to improve tax collection. It may take some time to establish a modern individual income tax system, for which not only the efforts of tax department but also the cooperation of other departments are required.

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