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Personal-Income-Tax Reforms and Effective-Tax Functions in China

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Using household-level data, we estimate the effective-income-tax function for China, that is, a nonlinear relationship between income and effective income tax rates. The estimated function can be used in a wide range of applied works in macroeconomics and public finance. In addition, using this function, we investigate the effects of tax exemption increases on properties of the personal income tax system. The main empirical result is that the effective-income-tax function becomes more progressive; however, the trend toward that was halted by tax exemption increases. Furthermore, variations in local progressivity indicate tax reforms had unequal impacts on the redistribution effects across income intervals. Furthermore, the tax reforms temporarily reduced horizontal inequality.
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Document Type: Research Article

Publication date: 01 September 2017

This article was made available online on 22 June 2017 as a Fast Track article with title: "Personal-Income-Tax Reforms and Effective-Tax Functions in China".

More about this publication?
  • As one of the world's oldest professional journals in public finance, founded in 1884, FinanzArchiv (FA) publishes original work from all fields of public economics which are of interest to an international readership, e.g. taxation, public debt, public goods, public choice, federalism, market failure, social policy, and the welfare state. Special emphasis is on high-quality theoretical and empirical papers on current policy issues.

    FA is a peer-reviewed journal commited to a prompt turnaround of submissions.

    FA is listed in the Social Science Citation Index (SSCI), in Current Contents/Social and Behavioral Sciences, in Econ Lit, in the Journal of Economic Literature, in IDEAS and RePEc and in the International Bibliography of the Social Sciences.

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