Research On Tax Welfare Cost In China

This paper, which is based on the theory of tax welfare cost, explained the method local equilibrium analysis methods and general equilibrium analysis method that measure tax welfare cost, and construct the tax smoothing model and analyze the factors on tax system and nontax system influencing the tax welfare cost.Main content of this paper: First,giving a definition of the connotation of "tax welfare cost" and geometric measure and the analysis and summarizes the characteristics of the cost of tax welfare on the basis of literature analysis. Second,the analysis of the methods measure tax welfare cost. Making a comparative analysis on measurement method of tax welfare cost from the angle of "Local Equilibrium Analysis" and the angle of "General Equilibrium Analysis", at the same time putting stress on core concept of the “Computable General Equilibrium Model", and analyzing the basic principles of operable tax smoothing model. Third, empirical measure of the tax welfare costs in China. Using tax smoothing method to measure the tax welfare cost in China from 2001 to 2013 from the perspective of the whole country, 31 provinces, municipalities, autonomous regions, and the three main industries. Selecting all kinds of specific indicators of tax system and non tax system factors and then using Panel Data fixed effects model to estimate the influence direction and extent of the various indicators to tax welfare cost. Forth, using a Panel Data fixed effects model to carry on an empirical validation on the relationships between tax welfare cost, economic growth and income inequality. Finally, on the basic of the theoretical and empirical analysis on the tax welfare cost, putting forward several policy suggestions about how to reduce the cost of tax welfare cost in China.The empirical research conclusion of this paper: First, from 2001 to 2013, the welfare cost of taxation is increasing by the index method. Because of the different industries tax revenue scale, the burden of the various types of tax categories, the price elasticity of demand and supply and there are also differences in international influence, these factors lead to the welfare cost of taxation are difference. Second the tax concentration and the welfare cost of taxation are positive correlation. Tax dispersion, tax base erosion degree and ratio between direct taxation and indirect taxation is negatively related to the tax welfare cost. The employment population, GDP and the welfare cost of taxation is positively correlation. The local tax revenue, the proportion of the second industry and the welfare cost of taxation are negative correlation. Third, because of different area distribution, welfare cost of taxation impact on local economic growth are difference in the respect of influence direction, the impact is positive for most areas, in the respect of influence extent, the influence on northeast region is greater than that in western region. Fourth, the increasing of tax welfare cost will amplify local income inequality, and the government expenditures can effectively reduce the income gap.The heuristic research conclusion of this paper: First, currently, the research for welfare cost of taxation, both in theoretical and empirical research, are stading in the surface. Academic and practical fields traditionally more attention in the sense of tax cost accounting(Administrative Costs). Second, the measure of welfare cost of taxation's operability alternative method is tax smoothing model, the method, this method compared with the theoretical methods accuracy also has certain limitations, the measure results can only give a roughly change trend to welfare cost of taxation. Third, the main reason of regional and industry welfare cost of taxation big different, is the different of price elasticity of demand and supply. Fourth, affect the welfare cost of taxation's size mainly is tax endogenous factors, and degree of tax system optimization's kinds of index factors may be the essential factor. Tax centralization and dispersion,the rate of direct tax and the degree of tax base erosion, is not only the main measure of good tax system but also one of the series of tax benefits cost index. Finally, the fair efficiency's welfare effect of the welfare cost of taxation is not always negative and showing differences in different areas. The increase of tax welfare cost year by year increases in income gap widening, but higher rate of economic growth.The policy suggestions of this paper: The tax system reform should strengthen the concept of tax welfare cost and promote the Pareto efficiency of tax system. Tax system reform should also follow the comprehensive tax cost target that include administrative cost and welfare cost, Based on the target of lowering the cost of the tax welfare cost should establish "wide tax base low tax rate" tax structure and improve the quality of tax statistics and strengthen the construction of tax micro data statistical information system.