A Study On The Impact Of Turnover Tax Burden On Residents’ Income Distribution

Along with the30years development of reform and opening up， China’seconomy has been grown rapidly, tax revenues risen substantially, residents livingstandards improved gradually. But at the same time, it caused the unfairness ofincome and the income distribution gap is widening among residents.The westerneconomic theory believes that the unfair distribution of income is the signal of marketfailure and is unable to be solved only rely on the market mechanism itself. The taxrevenue as an important tool of government macro control is mainly performed in thefollowing two aspects: on the one hand, organize financial income for the provision ofpublic products as well as provide material guarantee for the realization of nationalpublic functions. On the other hand, taxation has played an important role inregulating the distribution of national income through levying taxes in the link ofincome and consumption. All the time,the incidence of the tax is the core issue oftax research and reform.To study the relationship between tax shifting and incomedistribution means a great deal to understand the regulation of tax equity and incomedistribution. Since the1994tax reform, our nation has been determined turnover taxas the main tax structure. Therefore, the turnover tax burden and distributiondetermines the overall tax burden and distribution. With the urbanization process ofour country continues to advance, measurment of urban residents bearing the turnovertax burden has a huge practical implications for the research of turnover tax onincome distribution. Besides, it will bring great guiding significance to the nextcirculation tax reform, the establishment of tax policy as well as the incomedistribution policy adjustment. It is necessary to analyze causes and the impact of ourtax on the income distribution of urban residents,in order to optimize tax systemstructure.Therefore, the research is mainly divided into five chapters. The first chapter isintroduction. This chapter introduces the research background and significance,research status at home and abroad, literature review, research content, researchmethods and the innovation points and shortcomings of my paper. The second chapteris the analysis of theory. It introduces the theory of tax shifting and the tax incidence,the tax burden measure method, analyses the mechanism of turnover tax burden onresidents’ income distribution and construct the theory model of turnover tax affecting residents’ income distribution tax as the basis for the research of this thesis. The thirdchapter is the empirical analysis. Based on income and expenditure data of China’surban residents and using the input-output model to simulate the turnover tax circulatebetween different industry sectors, we can determine the proportional change in thefinal product price caused by taxes, namely, the effective tax rate of the product. Thenwe match the household consumption expenditure items with the different sectors ofinput-output table to get the corresponding tax rate of household sector’s expenditure,which can measure the turnover tax for the internal urban residents of differentincome groups (seven groups) is undertaking because of their spending (onlyconsiders the value-added tax, business tax, consumption tax). Then we use the Suitsindex to detect the progressivity (regressivity) degree of turnover tax, and finallyanalyze the effect of turnover tax on income distribution through the Gini Coefficient.The fourth chapter is the analysis of factors. Analyze the operation of the turnover taxin our current tax system structure and study on the tax system elements which canaffect turnover tax burden of different income levels.The fifth chapter is politicalsuggestions. Based on the previous two chapters ‘empirical and factor analysis, weput forward some political recommendations as to improve Chinese dweller incomeallocated pattern from the two perspectives of long-term and short-term.Through the research the conclusion can be drawn: the income distribution ofvalue-added tax, consumption tax on urban residents plays a negative role, and thebusiness tax plays a positive role. On the whole, turnover tax shows regressivefeatures, it reversely regulate the income distribution of urban residents. The root liesin expenditure ratio is different among varied income residents.Combined with the future direction of reform and the situation of our nation,wemake some suggestions from two aspects. In the long run, increase the proportion ofincome tax.In the short term, we should proceed with the internal reform of turnovertax. Reduce VAT rate of the necessities, deepen the VAT reform and perfect theconsumption tax system.