Study On Indirect Tax Incidence And Policy Impact Of Business Tax To VAT Reform

It is not conclusive about the question that whether the amount of tax that Chinese enterprises actually paid is too high or not.The ambiguity also exists in the impact of business tax to VAT reform(B2V reform)on reduce tax.The official statistics have verified the significant impact of B2T reform on reducing tax.However,many scholars thought the B2T reform has brought positive effect,which means the tax burden has been higher after B2T reform.In fact,there are different understandings about tax shifting,which cause these differences.Theoretically,indirect tax is the tax that shifts easily,and that means that enterprises are taxpayers,but not tax bearers.Empirically,the extent of shift is decided by supply,demand and enterprises' bargain power,which means that it is impossible that all enterprises shift whole indirect tax to consumers.Therefore,estimating indirect tax's incidence correctly will play an important role when exploring enterprise's tax burden and evaluating the impact of indirect tax's policy,such as B2T reform,accurately.In this paper,the indirect tax shifting model was constructed at the first part,based on the perspective of incomplete tax shifting.Then,after calculating the tax shifting parameter of each industry,a matrix of tax shifting parameter among industries was built.Finally,the paper analyzed the incidence of indirect tax,and the effect of tax reduction,income redistribution and social welfare on B2T reform from the perspective of incomplete tax shifting.Three conclusions have been indicated by the results:(1)Industrial tax shifting ability is decided by the supply elasticity and the demand elasticity of the product and the sector's bargain power.A higher of supply elasticity,demand elasticity and sector's bargain power would lead to a higher of bargain power.The result shows that most sectors cannot shift whole indirect tax to consumer,only some oligopolistic ones,such as construction and petroleum,exist overall shifting.(2)Industry's nominal indirect tax burden is not equal to real indirect tax burden.The nominal indirect tax rate of primary,secondary and tertiary industry is 0.10%,4.84%and 7.20%,respectively.However,their real indirect tax rate is 1.44%,4.24%and 8.03%,respectively.The upstream sectors' tax shifting degree,sectors' tax shifting ability,and proportion of final consumption are the three determinants.(3)Indirect tax is not fully passed on.In general,the enterprises bear 73.72%of indirect tax,the other parts is borne by consumer.The tax shifting parameter is the determinant factor of its burden share.(4)In general,the real indirect tax burden of enterprise is 3.98%,but varies among industries.The real indirect tax burden among tertiary,secondary and primary industry enterprise is 6.14%,2.99%,and 1.13%,respectively.Upstream industry's tax shifting degree and enterprise's tax shifting ability are two determinants.(5)In general,final consumers'real indirect tax burden is 5.98%,but varies among final consumers.The real indirect tax burden among urban residents,rural residents,government and export sector is 7.27%,6.89%,6.16%and 4.15%respectively.Varies of consumption structure is the main reason of varies tax burden among urban residents,rural residents,and governments.However,export sector bears the lightest tax burden is due to China's export rebate policy.(6)In general,the indirect tax is regressive,but varies between urban and rural areas.The MT index,Suit index and GE index show that the regressive level among the rural resident is higher than the level among the urban resident.Varies of consumer structure is the major reason.(7)B2V reform can reduce enterprise and final consumer's real indirect tax burden.For enterprise,the tertiary industry's indirect tax has reduced 1.19 per cent,which decreased highest rate;the secondary industry and firstly industry reduce 0.24 per cent and 0.25 per cent,respectively.For final consumer,the export sector has reduced 2.01 per cent.The urban household,rural household and government sector also reduce 1.38 per cent,1.34 per cent and 0.53 per cent,respectively.(8)The VAT reform can improve the income equity among residents,and improve resident's social welfare.