Personal-Income-Tax Reforms and Effective-Tax Functions in China

Rong Li () and Guangrong Ma

FinanzArchiv: Public Finance Analysis, 2017, vol. 73, issue 3, 317-340

Abstract: Using household-level data, we estimate the effective-income-tax function for China, that is, a nonlinear relationship between income and effective income tax rates. The estimated function can be used in a wide range of applied works in macroeconomics and public finance. In addition, using this function, we investigate the effects of tax exemption increases on properties of the personal income tax system. The main empirical result is that the effective-income-tax function becomes more progressive; however, the trend toward that was halted by tax exemption increases. Furthermore, variations in local progressivity indicate tax reforms had unequal impacts on the redistribution effects across income intervals. Furthermore, the tax reforms temporarily reduced horizontal inequality.

Keywords: effective-income-tax function; tax exemption; tax progressivity; marginal tax rate; horizontal equity (search for similar items in EconPapers)
JEL-codes: D31 H24 H31 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (4)

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DOI: 10.1628/001522117X14932991128976

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