The Economic Effects Of Fuel Taxation Refrom On China From A Cge Analysis

The central government of China decided to formally impose fuel taxation from Jan 1, 2009 instead of road fees. It has been ten years since NPC granted Highway Law which proposed to impose fuel taxation at 1998. In this period, Fuel taxation almostly became societal fouces every year. Many scholars did research from aspects of government decision, economic influence on some industries, problems facing tax reform, as well as reference from foreign experience. From this research, we can conclude that fuel taxation is really a complicated problem, so we need a complete, systemic and scientific framework to study and assess the tax reform schema in order to acquire full understanding the influence about fuel taxation to our economy. This is the start point of my paper. The following is the main content of each chapter.Chapter one is the review of history of fuel taxation, which is proposed to study fuel taxation in one complete framework including tax base, tax rate and taxpayer. This part also combs and conludes related foreign research. General equilibrium theory descipes one economy system is at a best status in a set of price system. This status is also a Pareto optimality status, so we can attend some welfare purpose via proper price adjustment. The Computable general equilibrium theory applies general equilibrium theory to empirical study on substantial economy, which foucs on how to solve a CGE model. The related tax economics illustrates economy variation after impose tax on one or multi department economy system in aspects of price, quantities etc. All these theories is proposed to get theoretical base about economy influence imposed by fuel taxation.Chapter two details related tax conomics theory, which includes partial equilibrium and general equilibrium tax theory. The partial equilibrium theory just study tax influence in one individual economy department without considering influence among different departments. It points out that the side which has high price elasticity has more power to shift tax burden. Overcoming this deflect, the general equilibrium theory considers these influence among departments. This chapter presents an abstract two economy department general equilibrium model. Through this model, it explains that all different practical tax can be converted to abastrct factor tax. The most important part of this chapter is to illustrate a two department economy how to react to capital factor tax imposed justly on one department, which explains the variation on net factor income, price and quantity of output of department. It points out that substituting and shift effects lead to these results. At the end of this chapter, it concludes the theory about welfare loss for tax and method on how to scientifically measure the welfare loss on the condition of mutli-sectors.Based on the theories introduced in the previous chapters, chapter three constructs a tax CGE model. The model is actual a collections of linear and non-linear equations, which descipes the macro economy from five aspects of production, consumption, income, expenditure as well as marketing equilibrium. The key parts is the selection of production and consumption function type. This paper choose multi-layer CES function to present the production and consumption progress.The following two chapters are the empirical work. The chapter four and five make the main industries and provinces as production sectors respectively, as well as urban resident, rural resident and government as consumption group, then try to analyze the economic effects from two different aspects. In these two chapters, all actual tax data are treated with the same way according to tax equivalence relation rules so as to acquire the factor tax rate structure. The tax reform is actually to adjust this factor tax rate structure. Compared the results of reference period and simulation period, research can analyze the change of primary economic index such as price, quantities, factor net income, and understand the change of factors structure. The welfare change is also known through comparing of all consumption groups' welfare level in two periods. The robustness of model needs to be test so as to assure the validity of research results. The model runs under different typical parameters sets in order to know the change trends.The chapter six is the final part of this paper, which makes conclusion from theoretical and empirical aspects. The economic influence on main industries and all provinces is also concluded here. Through these analyses about economic effect imposed by fuel tax, this chapter means to assess the government tax policy making from economic view.