The DSGE Analysis Of The Impact Of Value Added Tax Income Distribution On Macroeconomy

Intergovernmental financial competition has always been the problem that puzzled China’s economic development.The value added tax(VAT)is one of the main sources of government revenue,especially after the implementation of comprehensively "replace the business tax with a value-added tax" policy in 2016.After the merger of the two taxes,the value-added tax revenue accounts for about 1/4 of the total government revenue,and its allocation plan is particularly important to the financial allocation among the two-level governments.In order to research the impact of different allocation plans on China’s economy,we use the dynamic stochastic general equilibrium(DSGE)model to evaluate the impact of the proportion of value-added tax between central and local government based on the macro economic data from 2000 to 2017.At the same time,we further analyze the influence of the different sharing principles about value-added tax among the local governments(the principle of production land or the principle of consumption land)on China’s economy,so as to study the effect of the VAT allocation plan on the economy of China from both the vertical and horizontal dimensions.The first part of this paper illustrates the background,significance of the topic,and points out the possible innovations and shortcomings of this article.The second part is the classification and summarization of the existing relevant literature.The third part is the construction of the model,including three departments--representative family,manufacturer and the two-level government.The fourth part is the calibration of parameters and the test of model fitting effect.The fifth part is the study on the different allocation mechanism of value-added tax among two-level government.The sixth part concludes the paper and put forward some corresponding policy suggestions.The study found that,firstly,the "50:50" split plan of value-added tax between the central and local government is more conducive to the economy development compared with the other proportion after replacing the business tax with value-added tax.Secondly,compared with VAT tax return,transfer payment can narrow the regional economic gap in the short term,but it will have a certain negative impact on the national economic growth in the long term.Finally,compared with the sharing principle of production land,the principle of consumption land can not only promote the economic growth of the whole country,but also narrow the economic gap among regions and promote the sustainable and coordinated development of regional economy.All these show that the sharing proportion of value-added tax between the central and local government in our country is fairly good at present.But in the long term,in order to narrow the regional gap and make common prosperity come true,it is necessary to achieve the transformation from the sharing principle of production land to consumption land.