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The distributional impact of income tax in Canada and China: 1997-2005

  • Horn-Chern Lin
  • Tao Zeng
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    Purpose – The purpose of this paper is to examine the distributional impact of personal income tax in Canada and China over the most recent decade. Design/methodology/approach – The Urban Household Survey in China and the Canadian Socio-Economic Information Management System data are employed. Findings – It was found that, in both Canada and China, the personal income taxes are progressive, that is, tax payments and average tax rates are increasing in the income share of high-income taxpayers. Research limitations/implications – This paper does not explore the connection between tax progressivity differences and social, political, and cultural differences in the two countries. Practical implications – This paper is of interest to policy makers, economists, and academics, who seek to design an income tax system which can mitigate income inequity efficiently. Given that income taxes have changed in China in recent years, future studies should be conducted to compare the distributional impacts of the new tax system against those of the old tax system. Originality/value – This is the first study of distributional impact of income tax in China. This is also the first study to compare tax distribution between China and a developed country.

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    Article provided by Emerald Group Publishing in its journal Journal of Chinese Economic and Foreign Trade Studies.

    Volume (Year): 3 (2010)
    Issue (Month): 2 (June)
    Pages: 132-145

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    Handle: RePEc:eme:ceftpp:v:3:y:2010:i:2:p:132-145
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    1. Chu, K.-y. & Davoodi, H. & Gupta, S., 2000. "Income Distribution and Tax, and Government Social Spending Policies in Developing Countries," Research Paper 214, World Institute for Development Economics Research.
    2. Wagstaff, Adam & van Doorslaer, Eddy & van der Burg, Hattem & Calonge, Samuel & Christiansen, Terkel & Citoni, Guido & Gerdtham, Ulf-G. & Gerfin, Michael & Gross, Lorna & Hakinnen, Unto, 1999. "Redistributive effect, progressivity and differential tax treatment: Personal income taxes in twelve OECD countries," Journal of Public Economics, Elsevier, vol. 72(1), pages 73-98, April.
    3. Stefan Bach & Giacomo Corneo & Viktor Steiner, 2006. "Top Incomes and Top Taxes in Germany," CESifo Working Paper Series 1641, CESifo Group Munich.
    4. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    5. R. A. Musgrave & Tun Thin, 1948. "Income Tax Progression, 1929-48," Journal of Political Economy, University of Chicago Press, vol. 56, pages 498.
    6. repec:ttp:iibwps:13 is not listed on IDEAS
    7. Poterba, James M., 2007. "Income inequality and income taxation," Journal of Policy Modeling, Elsevier, vol. 29(4), pages 623-633.
    8. C. P. Khetan & S. N. Poddar, 1976. "Measurement of Income Tax Progression in a Growing Economy: The Canadian Experience," Canadian Journal of Economics, Canadian Economics Association, vol. 9(4), pages 613-29, November.
    9. Adam Wagstaff & Eddy van Doorslaer, 2001. "What Makes the Personal Income Tax Progressive? A Comparative Analysis for Fifteen OECD Countries," International Tax and Public Finance, Springer, vol. 8(3), pages 299-316, May.
    10. Lerman, Robert I. & Yitzhaki, Shlomo, 1995. "Changing Ranks and the Inequality Impacts of Taxes and Transfers," National Tax Journal, National Tax Association, vol. 48(1), pages 45-59, March.
    11. Ke-young Chu & Hamid Reza Davoodi & Sanjeev Gupta, 2000. "Income Distribution and Tax and Government Social Spending Policies in Developing Countries," IMF Working Papers 00/62, International Monetary Fund.
    12. Bahl, Roy W. & Bird, Richard M., 2008. "Tax Policy in Developing Countries: Looking Back—and Forward," National Tax Journal, National Tax Association, vol. 61(2), pages 279-301, June.
    13. Aggarwal, Pawan K, 1990. "An Empirical Analysis of Redistributive Impact of the Personal Income Tax: A Case Study of India," Public Finance = Finances publiques, , vol. 45(2), pages 177-92.
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