On the issue of "fee" or "tax", China made a decision at the early stage of establishing the social security system, which was determined by the economic system and the main forms of the market at that time. From 1984 to 1986, China began to try out the social pooling of retirement expenses for employees of state-owned enterprises in some areas, set up employee pension insurance funds, and implemented the financing method of combining enterprise contributions with individual contributions. Under the "pay-as-you-go" mode, China chose to raise funds through "payment". As the key moment of the transition from planned economy to market economy, most economic entities in the market are still state-owned enterprises and institutions. 1in March, 1995, in view of the increasing pressure of "hidden debt" brought by the pay-as-you-go system with the change of population age, the State Council promulgated the Notice on Deepening the Reform of the Old-age Insurance System for Enterprise Employees, which basically established the old-age insurance system with a partial accumulation mode combining social pooling and individual accounts in China, but in fact, the specific form of "payment" has not changed.

The "paid" model shows more and more limitations.

Although China's social insurance financing model and specific forms are theoretically matched, from the ultimate goal of China's modern social security system, it is found that the "social insurance overall payment" system shows more and more limitations, mainly in the following aspects:

-Restrictions on expanding safeguards coverage. The administrative means and regulations embodied in "payment" are often more binding on state-owned enterprises and institutions, but less binding on a large number of private and foreign-funded enterprises, thus exempting them from paying social security contributions, let alone realizing the long-term goal of bringing farmers into the security system.

-unable to form a stable insurance fund. Due to the low level of legislation on which payment is based, there are often phenomena such as default and evasion when collecting social insurance premiums, and it is difficult for law enforcement departments to impose compulsory punishment. Even some local governments abuse the power of "exemption" out of the enthusiasm of introducing foreign capital and protecting local enterprises, resulting in a low annual collection rate of social insurance premiums nationwide, which cannot be effectively guaranteed.

-high management cost. Because the collection of "fees" is outside the financial system, local administrative departments have formulated specific standards and implementation methods, which leads to the fact that multi-departments and multi-subjects in various regions have certain power over the income and expenditure of old-age insurance, industrial injury insurance, medical insurance and other expenses, which not only easily leads to administrative inefficiency, but also makes supervision "absent" to a certain extent. A few days ago, the "social security fund audit problem" that people discussed hotly fully exposed the disadvantages of this system.

"Taxation" is a better choice under the current situation.

In view of these disadvantages of "overall payment", levying social insurance tax has naturally become a concrete form of raising funds for reform. It can be said that in theory, "tax" is a better choice under the current situation, and its advantages are mainly reflected in several aspects.

First of all, the legislative level of "tax" is obviously higher than that of "fee" and it is absolutely rigid in the implementation process. Moreover, after years of tax law education, citizens have a higher awareness of tax payment, thus ensuring the stable collection of social insurance funds.

Secondly, the management cost of "tax collection" is lower than that of "payment" because "tax" is included in the national unified financial budget and is collected by the tax authorities according to law.

Thirdly, levying social insurance tax is obviously conducive to expanding the coverage of the social security system, and bringing private, "foreign-funded" and township enterprises, which are the mainstay of the market economy, into the social security system, thus providing protection for a large number of laid-off workers and retirees of such enterprises and a huge floating labor force. In addition, it laid the foundation for bringing farmers into the social security system.

Finally, the collection of social insurance tax is also conducive to the redistribution of social wealth, which can alleviate the weak function of social wealth redistribution to some extent.