A Study on the Income Redistribution Effect of China’s 2018 Personal Income Tax Reform

Zhang Xuan and Yue Ximing ()
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Zhang Xuan: Student at the School of Finance, Renmin University of China Renmin China
Yue Ximing: School of Finance, Renmin University of China Renmin China

China Finance and Economic Review, 2022, vol. 11, issue 1, 70-88

Abstract: Personal income tax is an important redistribution tool, its redistribution effect has been concerned by all walks of life. Using CHIP2018, this paper calculates and analyzes the income redistribution effect of the personal income tax reform plan in 2018, and finds that: The comprehensive taxation can raise the average tax rate, progressivity and redistribution effect of personal income tax; The rise of the standard of basic deduction, six special additional deductions, and the change of tax rate structure raise the progressiveness of personal income tax, but reduce the average tax rate and thus weaken the income redistribution effect of personal income tax; The comprehensive income tax will enhance the impact of basic deduction of expenses, six special additional deductions and the change of tax rate structure on the redistribution effect of individual income tax income; Under the joint action of the reform measures, the progressivity of individual income tax has risen as a whole, but the average tax rate of individual income tax and redistribution index have shown a sharp decline, both of which decreased by more than 50%. Using the household survey data of the year of reform, this paper comprehensively investigates the income redistribution effect of the personal income tax reform, which enriches the research on the redistribution effect of the new round of personal income tax reform.

Keywords: personal income tax; comprehensive taxation; special additional deductions; tax rate structure; income redistribution (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:cferev:v:11:y:2022:i:1:p:70-88:n:3

DOI: 10.1515/cfer-2022-0004

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