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Effects of Deductions on the Tax Burden Reduction and the Redistribution of the Income and Resident Taxes

Author

Listed:
  • Taro Ohno

    (Research Center for Social Systems, Shinshu University; Senior Researcher, Policy Research Institute of the Ministry of Finance)

  • Junpei Sakamaki

    (Researcher, PolicyResearch Institute, Ministry of Finance)

  • Author-Name:Daizo Kojima

    (Graduate School of Agricultural and Life Sciences, The University of Tokyo; Senior Researcher, Policy Research Institute of the Ministry of Finance)

Abstract

The status of the deductions in Japan fs income and resident tax systems is an important policy issue. To analyze this issue, it is essential to have an evidence-based understanding of the situation regarding the effect of deductions on the tax burden reduction and income redistribution. To this end, we use household microdata from the National Survey of Family Income and Expenditure during 1994?2014 to conduct a quantitative evaluation of the burden reduction and redistribution effects of deductions over a 20-year period. Initially, the higher the income group, the higher the burden reduction effect of the deductions (ratio of deductions to gross income). However, the advantageous treatment of the higher income group has been decreasing annually and, recently, the burden reduction effect has reached a proportional structure. Against this background, the redistribution effect of deductions has been increasing and now plays a more important role in correcting inequality. We show that the changes to the system made a significant contribution to this end.

Suggested Citation

  • Taro Ohno & Junpei Sakamaki & Author-Name:Daizo Kojima, 2021. "Effects of Deductions on the Tax Burden Reduction and the Redistribution of the Income and Resident Taxes," Discussion papers ron338, Policy Research Institute, Ministry of Finance Japan.
    • Handle: RePEc:mof:wpaper:ron338
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    References listed on IDEAS

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    Cited by:

    1. Andrey A. Pugachev, 2023. "Assessment of the Impact of Social Tax Deductions for Personal Income Tax on the Welfare and Inequality of Citizens in Russia," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 22(4), pages 789-813.

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    More about this item

    Keywords

    Income tax; resident tax; deduction; National Survey of Family Income and Expenditure;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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