Effects Of Reformation Of Personal Income Tax

Personal income tax reform is related to the vital interests of each individual,and now,the voice of reforming personal income tax is growing.Based on the input output table data in 2012,this paper sets up the social accounting matrix and constructs the three department CGE model using the standard CGE model constructed by Nobuhiro Hosoe,Kenji Gasawa and Hideo Hashimoto in 2014 to analyze the effects of reforming personal income tax on different groups of people.Contrary to the hypothesis of the homogeneity of elements in the previous production function,this paper assumes that there are two types of residents,one is the high-income groups,the other is the low-income groups,and then the factor are divided into capital,skilled labor and unskilled labor.The counterfactual assumptions used are: the exemption amount of personal income tax was enhanced to 4100,4600 and 5200.The simulation results show that the utility of high-income groups and the low-income groups are both affected by the reformation of the exemption amount,they all benefit from the reformation and the low-income groups is the bigger beneficiary.With the increasing in the exemption amount,the more the tax burden of high-income groups is to reduce,which is 0.14%,0.19% and 0.26% respectively.Because the initial utility of high-income groups is significantly bigger than that of the simulation scenario,so the value of EV is smaller.And the amplitude of increase of EV is less than the amplitude of increase of exemption amount.The tax burden on the low-income groups also decreases with the increase of the exemption amount,which is 0.81%,1.14% and 1.52%.And the magnitude of the reduction was significantly higher than the reduction in the tax burden of high-income groups.The Hicks equivalent EV of low-income groups is positive,because the initial utility value of low-income residents is smaller than the maximum utility under the scenario simulation.And the difference between the two value is large,resulting in the large value of EV.The scientific establishment of exemption amount is an indispensable part of the reform of the personal income tax in China.Based on that and combine with China's current usage of the amount of exemption,this paper puts forward three suggestions to personal income tax exemption system reform: Firstly,the setting of the exemption amount should consider the level of economic development in different regions.Secondly,when setting up a scientific exemption amount,combine the reform of other aspects of personal income tax together.