Effects of Deductions on the Tax Burden Reduction and the Redistribution of the Income and Resident Taxes

Taro Ohno, Junpei Sakamaki and Daozo Kojima
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Taro Ohno: Research Center for Social Systems, Shinshu University; Senior Researcher, Policy Research Institute of the Ministry of Finance
Junpei Sakamaki: Researcher, PolicyResearch Institute, Ministry of Finance
Daozo Kojima: Graduate School of Agricultural and Life Sciences, The University of Tokyo; Senior Researcher, Policy Research Institute of the Ministry of Finance

Discussion papers from Policy Research Institute, Ministry of Finance Japan

Abstract: The status of the deductions in Japan fs income and resident tax systems is an important policy issue. To analyze this issue, it is essential to have an evidence-based understanding of the situation regarding the effect of deductions on the tax burden reduction and income redistribution. To this end, we use household microdata from the National Survey of Family Income and Expenditure during 1994?2014 to conduct a quantitative evaluation of the burden reduction and redistribution effects of deductions over a 20-year period. Initially, the higher the income group, the higher the burden reduction effect of the deductions (ratio of deductions to gross income). However, the advantageous treatment of the higher income group has been decreasing annually and, recently, the burden reduction effect has reached a proportional structure. Against this background, the redistribution effect of deductions has been increasing and now plays a more important role in correcting inequality. We show that the changes to the system made a significant contribution to this end.

Keywords: Income tax; resident tax; deduction; National Survey of Family Income and Expenditure (search for similar items in EconPapers)
JEL-codes: C15 H24 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2021-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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