Analyze The Equity Of Tax Revenue Under The Tax Reduction Policy

Equitability is one of the basic principles of tax. In modern economy, tax takes upmost part in the state revenue; those economic entities could be influenced by it broadlyand profoundly. Government, individual and enterprise all have to consider the influenceof tax when they are about to make economic decisions. Only build on certain principals,can the tax system help the economy to stay in the best state. During the process of taxreformation, we should use certain principals as the guidelines for policy-making andstandards for evaluating the rationality of those policies.This paper creates a computable general equilibrium model which contains4departments and12types of residents. In this model, we are going to use policy simulationto analyze how the reformation of individual income tax and enlargement of value-addedtax could influence income distribution in the framework of structural tax reduction.through the analysis, here are the conclusions：（1）From the decrease of average tax andincrease of household welfare, we can see that, to increase the exemption of income taxmoderately could promote social equality and justice. But， when the exemption rise to3500Yuan, the income tax of high-income groups will drop sharply. This will widendifferences in personal income and household welfare, which will cause negativeinfluence to social equity; when the exemption is the same, the7grades excessprogressive rates reduce the burden of high-income groups more effectively and willwiden the household welfare. This demonstrates that, to increase the exemption separatelyis better from the perspective of promoting social equality and justice.（2）When thevalue-added tax transforms into business tax, the disposable income of resident willincrease. Compare to rural residents, the urban residents’ income rises more sharply, this isdue to the fact that the urban residents spend more on service, and the decrease of taxbearing in service industry benefits them very much. But under the decreased edge effect,the household welfare of rural residents is rising more sharply. The reformation ofvalue-added tax surely helps to increase the welfare of residents.