DU Li：Will Flat Tax Dampen the Redistribution Effects of Individual Income Tax System in China? ——A Simulation Analysis Based on 2012 Urban Household Survey Data

Abstract：Using the 2012 household survey data and a simulation analysis, this paper studies the redistribution effects of flat individual income tax in China. It is found that the redistribution effects of flat tax depend on the flat rates. If the flat rate is set at 20%, compared with the currently adopted scheduler individual income tax system, the suggested mix system and the comprehensive system, the flat tax system can perform better in terms of the overall redistribution effects and the bi-polarization curbing, but it does dampen the within-group redistribution effects for the high-income households. This paper also addresses the great impact of pre-tax income structure on the redistributive effects of individual income tax system and suggests to adopting flat individual income tax system in China.

Key words： Flat Tax    Redistribution Effects    Generalized Entropy Index    Hidden Income    Median Relative Polarization Index

source:Finance & Trade Economics ,No.8,2015