The Tax Misery Index is a yardstick for measuring tax burdens. It is calculated according to a country's corporate and individual tax rates, wealth tax rate, sales tax and value-added tax rate, and employer and employee social security contributions. Forbes has published the Tax Misery & Reform Index chart for 65 countries and regions. Having increased seven percentage points over the previous year, China's index in 2009 was 159 percent, second only to France's 167.9 percent. Qatar, the United Arab Emirates (UAE) and China's Hong Kong, meanwhile, trumped other economies by retaining the friendliest tax climate. China's index comprised 25 percent corporate income tax, 45 percent individual income tax, and 17 percent sales tax and VAT -- three numerical values that remained unchanged from the previous year. The misery index for employer social security was 49 percent – 4.5 percent higher than the previous year -- and that for employee social security was 23 percent -- 2.5 percent higher than the previous year. Although there have been disputes over the ranking results, the warning "correct any mistakes you have made and guard against any you have not" is nonetheless good advice for reforms to China's tax system. China has many types of tax, and frequently changes its tax policy because it is far from user-friendly. Countries and regions with the friendliest tax climate have fewer tax types, and the tax burden on their citizens is lighter. For example, Qatar levies only corporate income tax, and the UAE only social security tax.

Tax reforms also need to take equity into account to safeguard taxation consistency in all social strata. Domestic enterprises are compared with foreign-funded enterprises, the medium and low-income strata with the high-income stratum, especially celebrities and wealthy merchants, and taxpayers generally are compared with tax dodgers. All seek fair taxation. No matter in developed or emerging economies, before or since the international financial crisis, the interests of the majority should be protected. The structure of disadvantaged groups, the middle class and the wealthy should configure as a spindle rather than a dumbbell shape. This requires tax reforms to improve the fiscal and taxation system, adjust social structure and promote social stability and sound economic development. The table below, The Ratio Between Revenue and Income of the Top 1% Income Group in Certain Developed Economies and Emerging Economies, shows ratios in the U.S., France, Japan, Brazil and South Africa of more than two, while those in Italy, Germany, China and the U.K. are below two. China ranks between the U.K. and Germany. This implies that China has ample development space for tax reform.

While deepening its tax reforms, China should also increase public spending. This will guarantee sound and sustainable economic growth, enhance social welfare and also enhance China's international status. China's ratio of fiscal expenditure to GDP lags behind that of the U.S and the EU. Based on IMF statistics, from 2000 to 2012 China's ratio of fiscal expenditure to GDP increased from 17.05 percent to 24.86 percent. That in Germany, however, was more than 43 percent, that in the U.S. was 32 percent, and that in the U.K. and Japan was 33 percent. China clearly has some catching up to do.

The author is a researcher at the Development Research Center of the State Council.