An Analysis On VAT Reform Based On CGE Micro Simulation

Tax reform of China has kept more than20years since the1994tax reform. Economy of China has made great achievements during the period. Howver, as the economy continues to develop, more and more problems of tax system exposes, such as the irrational tax structure, the high macro tax burden, which squeeze the income of household, and restrict expanding consumer demand. Besides, irrational industry structure, large gaps between income distributions are all exist. These problems hinder China becoming moderately prosperous society and socialist harmonious society. This requires that the government to take a long-term perspective based on the overall situations, and further deepen fiscal and tax reform, to focus on reducing the tax burden, optimize the industrial structure, alleviate income inequality and improve residents1welfare ensuring steady economic growth, macro-premise. What’s more, make the point that focus on the effect of policy on aspects of tax burden, household income and income inequality.This dissertation undertakes computable general equilibrium microscopic simulations on tax reform, funded by the National Natural Science Foundation of China. The dissertation mainly includes three aspects:First, build a dynamic micro-simulation model of China through the method of CGE-IMH; the second is a micro simulation analysis on income tax reform, which focus on equality of distribution and welfare of household; thirdly, it simulates the reform of replacing business tax with VAT with dynamic model, and it focuses on the economic growth, macro tax burden and industrial tax burden. The results provide quantitative results, which can further improve and optimize the policy, and to provide references analysis for deepening fiscal and tax reform.Firstly, on the basis of2010IO table of China, combining various statistical yearbooks and other relevant data, the dissertation establishes2010Macro SAM of China. Upon this, continue to refine its original microscopic SAM, then combining the micro-survey data of CFPS2010to subdivide departments and residents, to formate the2010Micro-SAM of China, and make it balance with the method of SG-RAS. Secondly, the dynamic CGE microsimulation model of China is set up by two steps. The first step, build a Keynesian structure CGE model of China on the basis of IFPRI model, as well as the prepared Micro-SAM, and test the validity of the model; then make dynamic expansion, setting up capital accumulation, TFP and labor-related variables, so that the final CGE micro-simulation models can complete the tax policy simulation analysis perfectly.then programme the model code with the GAMS software, which provides a whole scalable analytical framework from the structure of qualitative mathematical equations system to program implementation. Thus, it does not only provides preparations for follow-up policy, but also provides a reference for similar studies.Thirdly, after building the model, the dissertation simulates the poliy of VAT reform, which get some conclusions based on the analysis of the micro simulation results.The dynamic simulation of replacing the business tax with VAT in whole industries, makes the point on economic growth, tax revenues and tax macro burden. The simulation results show that the VAT reform is positive for the economic growth, and it causes sustained GDP growth in three years, as wel as the three industries. Meanwhile, the government revenues also increase in a certain extent; by estimating the macro tax burden and tax burden on all sectors of the industries, macro tax burden of some sectors increase while most are declining; from the tax burden changes in three years, it can be seen that the VAT reform is good for reducing marcro tax burden, which achieves the basic realization of policymaker’s intent. But the tax burden among different industries vary greatly.Finally, the dissertation makes a conclusion on both theoretical research and empirical simulation of CGE modeling, points out the direction of the future development, clarifies the limitations and shortcomings of current researches, then provides suggestions for improvement of academic researches of both tax reform and CGE mirco simulation.