A Preliminary Study of the Index-linked Problems of Personal Income Tax

Inflation reduces the tax-free personal income and narrows the differences for different tax-payers,which is especially harmful to the tax-payers of the low income.The adoption of automatic or man-controlled index-linked measures can reduce the negative influence of inflation on personal income tax on the one hand,and make the taxation more complicated with less tax income and weaken the stabilizing function of personal income tax on the other.The institutional design of the personal income tax in China should take fair distribution of income as the primary goal and adopt proper index-linked measures in personal income tax.