Study On The Influence Of Indirect Tax On The Income Gap Between Urban And Rural Residents

In the process of economic and social development,serious income gap exists between urban and rural areas in China,indirect tax–as our main taxes should play income distribution function to narrow.Based on this perspective,by using the consumption expenditure and population data of urban residents,the indirect tax burden of urban residents are estimated.The indirect tax burden of rural residents will be estimated by using the indirect tax data and the rural population,we can draw the conclusion that the indirect tax is regressive between urban and rural residents when we compared with their respective income levels.We will study on the specific structure of the indirect tax,focusing on the distribution of the main component of the indirect tax—Value added tax and consumption tax.We calculate the Gini coefficient,Gini coefficient after tax and the MT index which is proposed by Mesgrave and Thin(1949).Through the analysis of index,we can conclude that Value added tax and consumption tax has negative effect,indirect tax is worsening income distribution.Using Tal index between 1994 and 2013 to measure the income gap between urban and rural areas,the empirical analysis show that Value added tax and consumption tax has negative effect; indirect tax whose main body is Value added tax is worsening income distribution as a whole.The reform program to replace the business tax with the Value added tax will be expanded so that the proportion of the Value added tax will further increase.Therefore we propose to expand the scope of Value added tax preferential and reduce the basic rate of Value added tax;because of the vacancy and the offside phenomenon of consumption tax,we put forward some suggestion to improve;we should gradually reduce the rate of indirect tax.