| The tax system has played an important role in adjusting the income gap and to optimize the distribution pattern. As a powerful tool for the analysis of tax policy, CGE (Computable General Equilibrium) model has been applied in many countries, and gradually developed into a branch of applied economics. This article consists of three aspects. First, by using the Gini coefficient and the portion of income of high and low class, we made a comprehensive analysis of the effect of China’s tax system in adjusting the income gap and optimizing the distribution pattern at present. Second, we constructed a static income tax CGE model oriented towards open economy. Third, we applied the model into a specific tax reform policy analysis.Firstly, this study made a review of tax regulation and income distribution, the personal income tax rate optimization, the development process and current circumstance of domestic and foreign tax CGE model research. Besides, we did a comparison of the general equilibrium analysis model with other methods, analyzing the characteristics and advantages of CGE model in studying tax rate optimization problem.Secondly, according to the China Statistical Yearbook1997to2007, there were seven level of statistics data of the income of urban residents in China. We calculated and compared the Gini coefficient of urban residents before and after tax to reveal the effect of the current tax system in regulate the overall gap between the situation of the residents’income ga. Similarly, according to the China Statistical Yearbook1997to2007, there were also seven level statistics data of the income of urban residents in China, by calculating the share of before and after tax income of urban residents in low and high income group, we can further analysis the regulation effect of tax on the income distribution of urban residents. We found that the overall effect of the regulatory role of the tax system at the current stage in China is weakening and unstable, indeed in a certain period of time there was a certain degree of reverse regulation results. Thus the functional orientation of the income distribution of the tax system, and the corresponding tax reform needs to be further deepened.Thirdly, based on LHR model, combining the national conditions of China with the basic issue we are concerning about, we build an open economy computable general equilibrium model of static income tax. This model is composed of four parts, including the production activities and factor markets, commodity markets and international trade, the behavior of economic entities and final demand and the macroeconomic equilibrium and closed rules. The static tax CGE model equations were described in a structure including four sections. The mathematical expression of the model contains the following modules:output and trade market module, price module economic main module, the system constraint module.Fourthly, this article gave a brief introduction of the Social Accounting Matrix (SAM). And it established the2007macro-social accounting matrix by a balanced approach of Cross-Entropy and a method that’synthesizing before dividing’. SAM contains19kinds of products and sectors of activity. Input factors are labor and capital, in which labor is divided into agricultural workers, industrial workers and skilled workers. Organizational institute are divided into Institutional residents, government departments and enterprises, in which residents contains urban residents and rural residents. SAM also includes the two accounts of the savings-investment and other regions of the world. The set of values of the relevant parameters and the base period of the CGE model is also described.Then, as the impact of the tax reform is introduced, we made a scenario simulation through static tax CGE model. This article has set9 different range of accommodation from10%to90%and8distinguished tax policies. The policies are described as follows.1. Urban and rural taxes and dues rate cut at the same time;2. Urban tax rate remain unchanged, the rural taxes and dues rate reduces;3. urban tax rate reduces, while rural taxes and dues keep unchanged;4. urban tax rate increases, and rural taxes and dues remain unchanged;5. urban tax rate incresases, and rural taxes and dues reduces;6. urban and rural tax rate increase at the same time;7. Urban tax reduces, while rural taxes and dues increases;8. Urban tax rate keeps unchanged, rural taxes and dues increases. So there are72kinds of scenarios in total, and the11main analog parameter values we tests are GDP, disposable income of rural residents, disposable income of urban residents, corporate income, government revenue, the total income of rural residents, the total income of urban residents, the number of the employed population. average income, the Gini coefficient, the social welfare function.Then, in these72scenarios, we compare the Gini coefficient and social welfare functions of adjustment programs under different range of accommodation and tax policy. We found that under a different range of accommodation, the Gini coefficient and social welfare function are regularly changes. Within each different range of accommodation, they appeared to be the same trend changing with certain tax policy. The policies are displayed as the Gini coefficient under that policy arrangement under different tax reform policy are from small to large: policy5, policy4, policy6, policy2, policy8, policy1, policy3, policy7; Similarly, different tax reform policy are displayed as social welfare function in descending arrangement:policy1, policy3, policy2, policy7, policy5, policy8, policy4, policy6. The involved eight policies work different way in improving social welfare and narrow the gap between rich and poor. That means when it improves social welfare, then it will fail to narrow the rich-poor gap. Otherwise then it narrows the rich-poor gap, it may decrease the social welfare function. Given the optimal evaluation of these eight kinds of tax policy, we conduct a comprehensive analysis of the Gini coefficient and the social welfare function in a same tax rate accommodation range, and found that in all accommodation policies, policy2made a result of better than the others. Compared to the other seven kinds of policies, this policy takes into account both reducing the Gini coefficient and maximizing the social welfare. With urban tax rates unchanged and rural taxes and dues reduced, the difference between urban and rural income will naturally reduce, and relative Gini coefficient is also reduced; in the case that the Gini coefficient decreases, rural residents taxes and dues reduction will make rural residents disposable income relative increase and the average wage also increases, and the unilateral welfare of rural residents will be improved. Due to the urban tax rates remaining unchanged, the social welfare of urban residents is essentially the same, so the whole social welfare has also been improved. And the comparison of GDP reveals that the GDP adjustment values are greater than the value of the base period. With the increase of rural taxes and dues, GDP increases. Greater tax reduction leads to larger personal disposable income, which drive consumption and stimulate economic growth. It disclose that within the framework of this article, when the rural and urban tax rate adjustment remain the same, in order to maintaining economic growth, narrowing the gap between the rich and the poor and improving social welfare, the most effective and reliable way is to keep the urban tax rates remain unchanged, and reduce the rural taxes and dues.Finally, this article summarizes the conclusions of the tax system research of our country at this stage and CGE model simulation, and makes suggestion to further promotion of the Chinese tax CGE model, and pointed out the direction of its development. |
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