The Calculations Of China's Effective Tax Burden

In the context of economic globalization,international mobility of capital is significantly enhanced and to a large extent States's economic competitiveness attribute to the international competition for capital.Since 2002 there have been a new round of tax cuts wave in global scale,corporation tax represented by a capital gains tax has become the focus of tax cuts that improve the country's tax competitiveness and reducing the cost of doing business in order to promote exports,attract domestic and foreign investment;at the same time reduce incentives for tax evasion,thus contributing to tax revenue increase.During the tax burden when compared to the level of our frequently used the statutory tax rate,but at times the statutory tax rate does not accurately measure the level of tax burden, in order to find a more accurate instrument for measuring the level of tax burden,we need to use the concept of "effective tax rate".Effective tax rate's calculation has two main directions, that is,"backward-looking calculations" and "forward-looking calculations." Marginal effective tax rate is one kind of "forward-looking calculations",which is the most important indicator.Marginal effective tax rate can make the complex income tax system simple;policy analysis always concern about how the tax policy changes national competitiveness,while the capital's marginal effective tax rate reflects the cost of capital taxation policy,which also reflects the country competitiveness.Therefore research on the marginal effective tax rate for the country to develop tax policy has an important significance.Through using the K-F model this paper calculates China's Average Marginal Effective Tax Rate on capital income from investment to buildings and machines financed by debt,new share issue or retained earnings in ten industries from 1997 to 2007.The results show compared to other countries,China's marginal income tax burden is too high,and the tax burden on capital income in China is at relatively high level which can be mainly attributed to high statutory tax rate and China's production-type VAT.