Effects Of Reformation Of Personal Income Tax

On August 31,2018,the Standing Committee of the National People's Congress passed a decision on the revision of the personal income tax law.Based on the specific measure of this reform,We constructed a tax CGE model to simulate their effects.Our simulation includes raising the exemption of personal income tax,expanding the level of low tax rates and comprehensive taxation based on family annual income.We hope to provide some new ideas and basis for further personal income tax reform.In this paper,we constructed a CGE model which is suitable for China's personal Income tax reform,based on the 2012 input-output table.In the model,we divided the representative residents into 12 groups,among them,7 groups in the town and 5 groups in the countryside.We designed 9 simulation scenarios to make comparison,we also use elastic growth model to get the theoretical exemption,which are 4100 and 4600.Disposable income,utility and EV are the indexes to measure the changes in household welfare.The main conclusions of this paper are:(1)The exemption of personal income tax can only improve the social welfare within a certain range.(2)The Collocation of exemption and progressive tax rate can improve residents' welfare more efficiently.However,only when they match well,or,it may only good for the richest.(3)Under a small amount of tax loss,income tax on family annual income can still significantly improve the welfare of all residents except the highest income group in urban areas,which is consistent with the original intention of personal income tax reform.Finally,the article puts forward the policy recommendations:(1)Don't blindly increase the exemption of wage income tax,and carefully use the reform plan to ad just the progressive tax rate structure.(2)To get information sharing of various departments as soon as possible,and strengthen tax collection and management.