What are the Challenges in Designing an Effective Personal Income Tax System?

Introduction
Taxation, as a primary media of the implementation of fiscal policies of various national governments, generally has three primary functions, which come as follow: * Raise funds as a main source of fiscal income of national governments * Stabilize the market and macro economy against market failure * Distribute and redistribute the income among individuals to reduce social wealth inequality
The priority of those functions varies from country to country and changes in different phases of social and economic development. For most developing countries, the widening gap between the rich and the poor is not only a major economic issue arousing public concern but also a major social issue. The developed west, yet is in need of effective taxation system to tackle with problems such as everlasting heavy deficit and dim market outlook.
Table 1 World Gini Indexes for Major Global Economies in 1990, 2000 and 2010 Year | U.S. | Canada | U.K. | Switzerland | Germany | France | Russia | China | Brazil | India | Japan | 1990 | 42.8 | 35.2 | 36.5 | 34.1 | 34.2 | 29.2 | 25.9 | 32.7 | 60.4 | 31.2 | 26.4 | 2000 | 44.2 | 33.3 | 37.5 | 33.4 | 30.3 | 31.1 | 42 | 40.7 | 58.5 | 32 | 27.6 | 2010 | 47 | 33.6 | 35.9 | 32.4 | 30.5 | 33.2 | 35.9 | 48.1 | 49.5 | 35.6 | 32.1 |

Among the taxes of all kinds, personal income tax is one of the most effective monetized tools targeting at individual residents and corresponding income source. Hereby, this essay illustrates the challenges in designing an effective income tax system on a basis of social fairness to achieve purposes of distributing and redistributing wealth, promoting social security, and reducing income disparity.

Discussion Concerning the Major Taxation System Elements 1. The system selection
The personal