China’s Tax Burden Research, Based On The Perspective Of Economic Growth And Income Distribution

In the year2007, according to the list of "Tax Misery Index" compiled by Forbes-the American popular business magazine, China ranked third following France and Belgium. In the same list of2009and2011, China was promoted to the second place, second only to France, which is a country of high welfare and heads the list almost every year. At the same time, affected by the global financial crisis and the European Debt Crisis, the growth rates of China’s economy slows down sharply, a tide of small and medium-sized enterprise bankruptcies emerge prominently, the problem of "Hollow-rization" in real economy alarms us repeatedly. Accordingly, the macro tax burden of China, however, is increasing year by year, the growth rates of tax revenues are ascending faster than that of GDP (from1998until now), tax burden level (minor-caliber) is also climbing from10.64%(in the year1994) to18.98%(in the year2011). Under the background of lower speed rates of economy growth and exceeding-GDP tax revenues, the disputes on excessive tax burden, which brings about efficiency losses and obstructs equity, are arising as a great clamor. The calls of tax slash, as the most directly method of releasing tax payer’s burden, is continuing without cessation.Tax revenue is a burden to the taxpayers, while for the government is the income (Gao Peiyong,2012). Drastic tax cuts will lead to public revenue decreases, and will surely affect the implementation of the construction of the construction on people’s livelihood. In order to balance the two sides, in2008, the Central Working Conference proposed "structural tax cuts", to achieve the goal of the all-round development: holding growth, expanding domestic demands, adjusting the structure and improving people’s life quality.Looking at the effect of four-year implementation, although the policy of "structural tax cuts" has achieved a certain effect, there is still no doubt that the overall effect is still weak, and the execution space is beginning to show a narrowing trend. Then a problem comes out:the tax burden optimization should begin at which point, in order to realize the utility maximization of economic, social, residents, under the minimum impact? To answer this question, we need a clear and objective understanding of China’s tax burden. Unfortunately, however, what we have seen so far are almost the discussions only limited to the clue of "income",(Gao Peiyong,2012) while ignored the indirect impact brought by tax as a financing measure for public expenditure. Few studies which merge "tax-public expenditure" are mostly focusing on qualitative analysis but not quantitative analysis, especially researches on the objective measurement and subjective evaluation about the distribution of income-such as a "sense of tax"-are really rare.This article will base on existing researches, in order to compensate for this shortcoming, and under the path of the directly affects of tax burden, by integrating the factor of public expenditure, analyze the mechanism and effects of tax burden on economic growth and income distribution, to measure the equity and efficiency and to find lacks of tax burden, then propose constructive optimization suggestions.This paper is divided into seven chapters. Chapter1is introduction, which introduces the research background, definitions of main concepts, research structure and research methods, innovations and shortcomings. Chapter2is literature review, by reviewing existing researches about tax burden and economic growth, tax burden and income distribution, and the current situation of tax burden and ways to optimize it, to determine the emphasis of this research. Chapter3-4is the theoretical part. Chapter3takes the perspective of economic growth to analyze the efficiency of tax burden. Under a framework of "tax-public expenditure", analyze the mechanism of how economic growth influences tax burden, and make a growth model under an assumption of endogenous public expenditure. Chapter4selecting a perspective of income distribution, researches the tax burden equity on two dimensions:objective measurement and subjective evaluation. This part sets up mechanism and path of tax burden-income distribution about both macro and micro aspects on national economy sector and residents sector. Based on these analyses, further introduces the concept "sense of tax" to measure people’s feelings about tax burden brought by the distribution of tax burden, and then analyzes the affecting-mechanism of "sense of tax". Chapters5-6are based on the empirical analysis of the reality of China’s tax burden. Chapter5is empirical analysis on China’s tax burden under the perspective of economic growth. By using actual data from the1994tax reform until now, estimating China’s macro tax burden level and structure, and making descriptive analysis, then using the MATLAB numerical simulations and VAR model econometric analysis methods to investigate tax efficiency under the perspective of economic growth. The results show that:although the level of the overall tax burden has not been an obstacle to economic development in China, there is still a structurally high problem. Kinds of labor or consumer tax instead of capital tax will promote economic growth. Chapter6is the tax burden empirical analysis under income distribution perspective:objective measures and subjective evaluation. In one aspect of objective measures which is on the national economy level, use demand-supply price elasticity perspective and the distribution of national income perspective gradually to analyze the tax burden in China. The results show that, compared with tax revenue, China’s transfer payments are very little, the tax burden commitment by non-governmental sector far exceeds the scale of transfer payments it can get; specifically in the non-governmental sector internal, tax burden mostly flows to household sector. In another aspect of objective measures which is on the household economy level, the analyses begin with a description of residents’income gap, and find out that the gaps are easily identified in all three levels:income, consumption and property, and among them the property gap is the most serious one. Secondly, by using MT index, tax-shifting model and Kuznets ratio, investigate the income distribution effects of personal income tax and indirect taxes. The results show that the improving effect of personal income tax impacting on income distribution gap is very limited; since tax reform in2011not only increased the exemption amount but also decreased the average tax burden, the middle-income class becomes the biggest beneficiary, the income gap has no significant improvement, even in lower average wage industries such as manufacturing and services, income distribution effects weakened instead of strengthened compared to before the tax reform. The indirect taxes show obvious regressive nature, and are mostly born by low-income class, and in face further deteriorate the unequal distribution of income. In the "sense of tax" part in subjective valuation, based on a survey data on "tax burden and public expenditures"(343city households in Jinan and Zibo), analyze the influencing factors of residents’"sense of tax". It reveals that conditioned by the individual difference factors, tax burden will impact residents’"sense of tax" in both two paths:tax and public expenditures. While comparatively speaking, compared with factors of public goods (services), factors of tax cost have more significant effects on residents’"sense of tax", especially the variable of tax equity. Chapter7is the efficiency and fairness of trade-offs:conclusions and recommendations. This part mainly on the basis of the theoretical and empirical analysis, review the research conclusions on China’s tax burden under the view of economy growth and income distribution, reference to the tax burden optimization principles and China’s reality, propose the tax optimization principle as "give priority to fairness with due consideration to efficiency", and made targeted policy recommendations.The main innovations of the article are as follows:Firstly, this article measures the efficiency and equity of the tax burden, under the framework of "tax-public expenditure". Under the path of the directly affects of tax burden, this article integraes the indirect impact brought by tax financing public expenditure. Merging the clues of "income" and "spending", this article analyses the mechanism and effects of tax burden on economic growth and income distribution, to measure the equity and efficiency of the tax burden, and compensates for the shortcoming of the discussions only limited to the clue of "income".In the aspect of tax efficiency, combining with the specific tax system in China, this article amends the calculation formula to estimate China’s macro tax burden level and structure, and then uses the MATLAB numerical simulations and VAR model econometric analysis methods to investigate tax efficiency. In the aspect of tax equity, considering the path of "tax-public expensive" on national income distribution, this paper redraws the links, downwards the production tax to define two levels of national income as initial and final distribution, and then uses the distribution pattern of national income to mearsure macro tax burden equity. On the basis of data optimization, do the empirical analysis in China also.Secondly, with the natural experiment advantages of personal income tax reform in2011and the surney datas of J city, we use MT index to investigate the income distribution equity of personal income tax in2010-2011.The results show that:gap between industy is one of the most important reason leading to the income distribution gap, and the improving effect of personal income tax is very limited. Since tax reform in2011not only increased the exemption amount but also decreased the average tax burden, the middle-income class becomes the biggest beneficiary, the income distribution of personal income tax has no significant improvement, and even in some industries, income distribution effects weakened. Perfecting the personal income tax system, the key is to alter the collection mode, and it is necessary to change to the comprehensive classified collection mode.Thirdly, based on the objective measurement, further introduces the concept "sense of tax" to measure people’s feelings about tax burden to make subjective evaluation on the income distribution equity of tax burden, compensates for the lacks of the current research, and provides the beneficial reference to solve residents’"tax misery". To be specific, under the framework of traditional economic analysis, the paper integrates the behavioral economics theory to analyze the path and mechanism of tax burden on people’s "sense of tax", and to constructe the residents’"sense of tax" influence function, on three dimensions:tax cost, public expenditure (goods) benefits and personal differences. On this basis, make empirical analysis using the survey data on "tax burden and public expenditures"(343city households in Jinan and Zibo).