Taxation Vince文档格式.docx

Taxation Vince文档格式.docx

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2.1.3ThemissionofTaxation9

2.2IdentifyingandcomputingthetwoScenarios9

2.2.1Scenario19-10

2.2.2Scenario210-11

2.2.3ViewsabouttaxationinChinaandUK11

3Conclusionsandfindings11

4Harvardreferences12

1Introduction

Tax,afeechargedbyagovernmentonaproduct,income,oractivity.Iftaxislevieddirectlyonpersonalorcorporateincome,thenitisadirecttax.Iftaxisleviedonthepriceofagoodorservice,thenitiscalledanindirecttax.Inthisessay,IwilldescribeindetailthecurrentenvironmentinChinaandbrieflycompareandcontrastittothetaxenvironmentintheUK.Andthen,identifytherelevantincome,expensesandallowanceswiththegiventwoScenariosthroughcalculatingtaxableamountsandtaxpayable.

2Analysis

2.1ComparisonofthecurrenttaxenvironmentinChinaandUK

2.1.1Fundamentalconceptsoftax

ThePeople'

sRepublicofChinapracticesthesystemofpeople'

scongress.China'

sConstitutionstipulatesthatallpowerinthePeople'

sRepublicofChinabelongstothepeople,andtheorgansthroughwhichthepeopleexercisestatepoweraretheNationalPeople'

sCongress（NPC）andthelocalpeople'

scongressesatdifferentlevels.InChina,taxlawscomefromNationalPeople’sCongress.‘IndividualswhoaredomiciledinChinaorwhoarenotdomiciledbuthaveresidedinChinaforatleastoneyearshallpayindividualincometaxinaccordancewiththisLawonincomederivedfromsourcesinandoutsideChina.IndividualswhoareneitherdomicilednorresidentinChina,orwhoarenotdomiciledandresideforlessthanoneyearinChina,shallpayindividualincometaxinaccordancewiththisLawonincomederivedfromsourcesinsideChina.’（PRCIndividualIncomeTaxLaw）[1].

Figure-1TheclassificationoftaxesinChina[2]

Incometaxes

individualincometax

corporateincometax

Turnovertaxes

value-addedtax

businesstax

consumptiontax

tariff

Propertyandbehaviourtaxes

stamptax

deedtax

landappreciationtax

urbanrealestatetax

resourcetax

vehicle/vesseltax

Othertaxes

urbanmaintenanceandconstructiontax

otherminortaxes

Aswithindividualincometax,itshouldbeleviedonthecategoriesofpersonalincome,suchasincomefromwages,salaries,incomeofindividualindustrialandcommercialoperatorsfromproductionorbusinessoperation,incomefrombusinessoperationscontractedorleasedfromenterprisesorotherundertakings,incomefromlaborservice,incomefromremunerationstoauthors,incomefromroyalties,incomefrominterests,dividends,andbonuses,incomefromtransferofproperty,andincomefromtheleasingofproperty.Non-taxableitemsarehousingallowance,homeleavetravelallowance,relocationandmovingcosts,reimbursementofmealsandlaundry,children’seducation,reimbursementofbusiness-relatedexpensesandforeignlanguagecourses.Thetaxonanindividual’staxisat3%to45%in2012whichisshownbelow（Figure-2）.ThenewLawraisesindividualincometaxthresholdtoRMB3,500,forexpatriates’incomeisRMB4,800.Thetaxyearrunsfrom1Januaryto31December.

Figure-2TaxratesinChina[3]

IntheUK,theHMRevenue&

Customs（HMRC）rewritetheUK'

sprimarydirecttaxlegislationtomakeitclearerandeasiertouse.Thetaxyearrunsfrom6Aprilto5April.ThethreemostrecentActsoftheTaxLawRewriteproject-CTA2009,CTA2010andTIOPA2010-completetheworkoftheprojecttorewritethemaindirecttaxlegislation.EachoftheseActscontainstimelimitedpowerstomakecorrections.Toensurethatthesepowersareexercisedinaccordancewitharrangementsagreedduringthelifetimeoftheproject,theexternalCommitteeswhichhaveoverseentheworkoftheprojectwillasbeforereviewallproposalsmadebyHMRevenue&

Customs（HMRC）tousethepowers.DetailsoftheproposalsandthedecisionsoftheCommitteeswillcontinuetobepublishedontheHMRCwebsite.

Figure-3TheClassificationoftaxesinUK[4]

Tax

Sufferedby

Incometax

Individuals

Pratnerships

Corporationtax

Companies

Capitalgainstax

Partnerships

Figure-4SchedularsysteminUK[5]

Figure-5IncomeTaxratesandtaxablebands[6]

Figure-6Currenttaxrates（Briefly）[7]

Figure-7IncomeTaxallowancestable[6]

Figure-8Comparisonoftaxbases[8]

China

UK

Taxableincome

Non-taxableincome

basicsalaries

housingallowance

incomefromemployment

statebenefits

foreignserviceallowances

homeleavetravelallowance

Incomefromself-employment

allISAs

costoflivingandhardshipallowances

relocationandmovingcosts

pensionincome

rents

awardsandbonuses

children'

seducation

interestonsavings

taxcredits

taxreimbursement

reimbursementofmealandlaundry

investmentincome

premiumbond

IITbornebytheemployer

foreignlanguagecourses

overtimepay

reimbursementofbusiness-relatedexpenses

rentalincome

othercashcompensation,allowancesandsubsidies

trustincome

Taxevasionistheintentiontoevadeanexistingtaxliability,whichofteninvolvesanelementofcriminalityorfraud,suchasthefailuretodiscloseincome.Itisdishonestbehaviorandagainstthelaw.ThelawrelatingtotaxevasionwasstrengthenedbytheFinanceAct2000,whichintroducedastatutoryoffenceoffraudulentlyevadingincometax.Onsummaryconvictioninamagistrate’scourt,offendersmaybesentencedtouptosixmonthsinprisonandmaybefinedupto£

5,000.Onindictmentinahighercourt,thepenaltiesareincreasedtoamaximumofsevenyearsinprisonand/oranunlimitedfine.Theunacceptablereductionofone’staxliabilitybyorderingone’saffairsinaparticularwayconstitutestaxavoidance,whiletheacceptablereductionofsuchliabilityconstitutestaxmitigation.Taxpayersareentitledtoorganizetheirfinancialaffairsinanywaytheycandosoinsuchawaythattheirtaxburdenisminimized.AsnotedbyLordNolan:

‘Thehallmarkoftaxavoidanceisthatthetaxpayerreduceshisliabilitytotaxwithoutincurringtheeconomicconsequencesthatparliamentintendedtobesufferedbyanytaxpayerqualifyingforsuchreductionofhistaxliability.’[9]

2.1.2Thetaxpractitioner

TheresponsibilitiesofthetaxpractitionerisdealingwiththeInlandRevenue,advisingclients,calculatingliabilities,respectingconfidentiality,andseekingadvicewhenneeded.Recently,theroleoftaxpractitionershasexpandedtoincludeadvisingonfinancialmanagement,planningthetimingoftaxincidences,andliaisingwithlawyersontheinterpretationandapplicationoftaxlaws.Taxpractitionersmustprovideprofessionalassistancetotaxpayers,andshouldnottakeadvantageofloopholesinlaws.Taxpractitioner’sethicalresponsibilityistoupholdthelawandtodischargehisdutytohisclientaccordingtothebestofhisknowledgeandability.

2.1.3ThemissionofTaxation

Taxesarecollectedbythegovernmenttoraisefundandimproveinfrastructure,suchasenhancingeducationenvironment,improvingmedicalservice,buildingcommunityfacilities,andstreetlighting.Thepurposeoftaxationistofinancegovernmentexpenditure.Itcanalsosupporttheoperationofthegovernmentandcarryoutthefunctionssuchasnationaldefense,andprovidinggovernmentservices.Anidealtaxexistswhenpeoplearewillingtopaytaxesandtheycanalsoenjoythereturnsofthetaxpaid.

2.2IdentifyingandcomputingthetwoScenarios

2.2.1Scenario1

Localemployeesaretaxedonthebasisofthebalanceoftheirmonthlyincomeafterdeductingtheirsocialbenefitscontribution,astandarddeductionofRMB3,500andthenapplyingtheprogressivetaxrateasshowninthetableontheright.TheemployerisobligedtowithholdthefulltaxamountandsubmitthetaxestotheappropriateChineseauthoritiesonbehalfofitsemployees.Adetailedsamplecalculationofemployee’ssocialbenefits,incometaxandnetsalarycanbefoundintheversionofFigure-2.

TaxableIncome=GrossSalary–SocialBenefits–¥

3,500

IIT=TaxableIncomexTaxRate–QuickDeduction

NetSalary=GrossSalary–SocialBenefits–IIT

TaxLiability=（￥50,000-￥18,400-￥3,500）*25%-￥1,105

=￥28,100*25%-￥1,105

=￥5,920

Thus,WangshouldpayRMB5,920taxforthe2012/13taxyear.

2.2.2Scenario2

Steve’staxcomputationisasfollows.Theincometaxpayableis£

286.4.

Figure-9:

TaxComputationForm

grossincome£

taxalreadypaid£

grosssalary

11,000

705

selfemployment

1,432

dividend,plustaxcredits（270+30）

300

30

grossinterestbeforetax（800+200）

1,000

200

totals

13,732

935

lesspersonalallowance

-8,105

taxableincome

5,627

incometaxdue:

Steve'

stotalincomeislessthan34,370,thetaxrateis20%exceptfordividends,thesearetaxedat10%

basicrateof20%on5,957

1,191.40

dividends£

300at10%

totaltaxdueonincome

1,221.40

taxalreadypaid

-935

incometaxpayable

286.4

Tocalculatethetaxpayablefor2012/13,weshouldcalculatetaxonthetaxableincomeuptothelimitof£

34,370at20%.Savingsincomewill,insomecircumstances,onlybetaxableat10%,evenifthebankorbuildingsocietyhastaxeditat20%soarepaymentmaybedue.Then,iftaxableincomeisover£

34,370upto£

150,000,taxat40%,andover£

150,000at50%.A