The Analysis On The Shifting And Incidence Of Value Added Tax In China

Value-added tax is more than just a fundamental tax type, and it is also animportant tool for revenue of the government and economic-regulating. In China, VATbecomes a main source of the tax revenue. Its form is not limited to the circulationimposed, wide and significant regulating surface. VAT has played an active role in theprotection of revenue, promoting economic development and maintaining socialfairness. Nevertheless, it is tent to tax shifting in VAT. When a country utilizes the VATas a tool to regulate the economy, it may violate the purpose of the tax policy andweaken the leverage of tax adjustment because of the tax shifting. In a market economyenvironment, the industry producers, as a rational economic man, can try to transfertheir tax burden in a variety of possible ways. That is because it will be biased when thecountry carry out macroeconomic regulation and control to affect the economic andincome redistribution through tax policy. With the continuous development of Chinesemarket economy and improvement, tax policy, as a crucial tool for affecting theeconomic and income redistribution, has to take into account the tax burden shifting andtax incidence in the implementation. Only after knowing the final destination of theVAT tax, tax policy can play leverage. Now, our theorists lack specific research of VATtax burden shifting and tax incidence.First of all, this thesis will summarize the abroad achievements of tax burdenshifting and tax incidence. Then it will make a point that the supply and demand elasticityis the most important factor of tax burden shifting. The tax burden shifting coefficient willbe got by analysis of the supply and demand elasticity. In addition, the tax burden shiftingregular is in the process of tax burden shifting when the demand elasticity is zero or thesupply elasticity is infinity. The tax burden is undertaken by demanders; on the contrary,it’s undertaken by suppliers; other cases, it’s undertaken by suppliers and demanders.Secondly, the paper, which is based on theoretical analysis and actual situation, willanalyze the six national economy of China in a concrete way and comes to theconclusion that in the agriculture department, it is difficult to turn out, but easier totransfer in, actual burden heavier; in the food manufacturing sector, it is difficult to turn inand nominal tax burden is higher than the actual tax burden; in the textile sector,department of sewing and leather products manufacturing, it is easy for tax burden toturn in or turn out; in the department of building materials and non-metallic minerals,the actual tax burden is lower than nominal tax burden; in the electric power, heat and water production and supply industry and department of coking, gas and oil processing,the tax burden can both be transferred out and in, but mainly the former one. Thirdly,based on data from ‘China Statistical Yearbook’ and ‘China Urban (rural) Life and PriceYearbook’2000-2010and the use of ELES model and technology, the thesis willsimulate the input-output table indirect transfer cases in different sectors, through theelasticity of supply and demand elasticity estimates, the empirical study of the differentindustries value-added tax in financial burden of urban and rural residents and betweenproducers. The results show that the consumers bear most of the tax mining, buildingmaterials department and non-metallic minerals, transportation, warehousing postalservices, information transmission, computer services and software industry and theproducers bear most of the tax sewing and leather products manufacturing, real estate,leasing and business services, electric power, heat and water production and supplyindustry and coking, gas and oil processing industry; while the rest of the industry isbasically indirect taxes owning an average burden of consumers and producers. And then,according to income level, the consumers are divided into seven groups to calculate thetax burden rate for each group of consumers, versus each disposable income ratioscompared. VAT has proved regressive and it is unfair. Finally, based on the theoreticaland empirical analysis, the thesis will summarize that the tax burden shifted due to thepresence of the VAT tax is not conducive to a fair and drawbacks generated byeconomic, such as to weaken the leverage of tax adjustment, to boost social incomepolarization and to reduce the propensity to consume social. Additionally, the studycomes up with the following suggestions: to reduce value-added tax proportion, toincrease income tax proportion; to refine value-added tax rate; to add tax subsidies todepartment which is burdened with heavier actual tax; to change tax shifting conditionsof some department.