IDEAS home Printed from https://ideas.repec.org/a/spr/jecrev/v75y2024i1d10.1007_s42973-023-00125-6.html
   My bibliography  Save this article

Factor decomposition of changes in the income tax base

Author

Listed:
  • Taro Ohno

    (Policy Research Institute, Ministry of Finance)

  • Junpei Sakamaki

    (Policy Research Institute, Ministry of Finance)

  • Daizo Kojima

    (Policy Research Institute, Ministry of Finance
    The University of Tokyo)

  • Tomotsugu Imahori

    (Policy Research Institute, Ministry of Finance)

Abstract

Following generous tax deductions, Japan’s income tax base is facing shrinkage; however, this trend has evolved not only due to changes to the tax system, but also due to changes in income distribution and population composition. In this study, we use household micro data from the National Survey of Family Income and Expenditure (NSFIE, 1994–2014) to explicate the state of deductions and trends in household distribution over a 20-year period while considering the contribution of each factor to changes in the tax base through decomposition. Using a microsimulation analysis, we also assess the effects of recent changes to the tax system on the tax base. Based on a long-term perspective, while the tax base has primarily been eroded due to the effects of falling incomes and an aging population, the contributions of tax system changes responding to such pressures have been limited. Including both expansion and contraction periods in the deduction system also has an effect. From a short-term perspective, changes in the tax system have had a certain impact, particularly in the 2000s, when the tax base was expanded by reducing deductions. However, this effect has eventually been offset by changes in income distribution and population composition.

Suggested Citation

  • Taro Ohno & Junpei Sakamaki & Daizo Kojima & Tomotsugu Imahori, 2024. "Factor decomposition of changes in the income tax base," The Japanese Economic Review, Springer, vol. 75(1), pages 1-28, January.
    • Handle: RePEc:spr:jecrev:v:75:y:2024:i:1:d:10.1007_s42973-023-00125-6
    DOI: 10.1007/s42973-023-00125-6
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s42973-023-00125-6
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s42973-023-00125-6?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Olivier Bargain & Tim Callan, 2010. "Analysing the effects of tax-benefit reforms on income distribution: a decomposition approach," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 8(1), pages 1-21, March.
    2. Olivier Bargain, 2012. "The Distributional Effects of Tax-benefit Policies under New Labour: A Decomposition Approach-super-," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 74(6), pages 856-874, December.
    3. Taro Ohno & Takahiro Kodama & Ryutaro Matsumoto, 2018. "Decomposition Approach on Changes in Redistributive Effects of Taxes and Social Insurance Premiums," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 14(4), pages 777-802, July.
    4. Bessho, Shun-ichiro & Hayashi, Masayoshi, 2014. "Intensive margins, extensive margins, and spousal allowances in the Japanese system of personal income taxes: A discrete choice analysis," Journal of the Japanese and International Economies, Elsevier, vol. 34(C), pages 162-178.
    5. Takeshi Miyazaki & Yukinobu Kitamura, 2016. "Decomposition of Redistributive Effects of Japanese Personal Income Tax, 1984-2009," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 72(3), pages 334-368, September.
    6. Shun-ichiro Bessho, 2018. "Child Benefit, Tax Allowances and Behavioural Responses: The Case of Japanese Reform, 2010–2011," The Japanese Economic Review, Springer, vol. 69(4), pages 478-501, December.
    7. Altshuler, Rosanne & Dietz, Robert, 2011. "Reconsidering Tax Expenditure Estimation," National Tax Journal, National Tax Association;National Tax Journal, vol. 64(2), pages 459-489, June.
    8. Andrea Albarea & Michele Bernasconi & Cinzia Di Novi & Anna Marenzi & Dino Rizzi & Francesca Zantomio, 2015. "Accounting for Tax Evasion Profiles and Tax Expenditures in Microsimulation Modelling. The BETAMOD Model for Personal Income Taxes in Italy," International Journal of Microsimulation, International Microsimulation Association, vol. 8(3), pages 99-136.
    9. Hiroyuki Yashio & Keishi Hachisuka, 2014. "Impact of Population Aging on the Personal Income Tax Base in Japan : Simulation Analysis of Taxation on Pension Benefits Using Micro Data," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 10(3), pages 519-542, October.
    10. Poterba, James M., 2011. "Introduction: Economic Analysis of Tax Expenditures," National Tax Journal, National Tax Association;National Tax Journal, vol. 64(2), pages 451-457, June.
    11. Taro Ohno & Masahiko Nakazawa & Kazuaki Kikuta & Manabu Yamamoto, 2015. "Comparison of Taxes and Social Insurance Premium Burdens in Household Accounts," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 11(4), pages 547-572, September.
    12. Shunji Tada & Koyo Miyoshi, 2015. "Verifying household incomes in Japanese statistics," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 11(4), pages 531-546, September.
    13. Doi, Takero, 2017. "Effects of Deductions of Personal Income Tax on Income Inequality in Japan: A Microsimulation of Reform of Spousal Tax Deductions and Tax Credit," Economic Review, Hitotsubashi University, vol. 68(2), pages 150-168, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ohno, Taro & Sakamaki, Junpei & Kojima, Daizo & Imahori, Tomotsugu, 2021. "Effects of deductions on the tax burden reduction and the redistribution of the income and resident taxes," Japan and the World Economy, Elsevier, vol. 60(C).
    2. Taro Ohno & Junpei Sakamaki & Daizo Kojima, 2020. "Factor decomposition of changes in the tax base for income tax," Discussion papers ron331, Policy Research Institute, Ministry of Finance Japan.
    3. 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.
    4. Cinzia Di Novi & Anna Marenzi & Dino Rizzi, 2018. "Do healthcare tax credits help poor-health individuals on low incomes?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 19(2), pages 293-307, March.
    5. Lukas Reiss & Philip Schuster, 2020. "Explaining the evolution of the Austrian implicit tax rate on labor from 1976 to 2016," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(2), pages 303-341, May.
    6. Avram, Silvia, 2014. "The distributional effects of personal income tax expenditure," ISER Working Paper Series 2014-26, Institute for Social and Economic Research.
    7. Masumi Kawade, 2018. "National Burden and Economic Inequality: Micro-Simulation Analysis," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 14(2), pages 245-266, March.
    8. Bargain, Olivier B. & Jara Tamayo, Holguer Xavier & Magejo, Prudence & Benhura, Miracle, 2018. "Learning from the," IZA Discussion Papers 12017, Institute of Labor Economics (IZA).
    9. Vanesa Jorda & Jose M. Alonso, 2020. "What works to mitigate and reduce relative (and absolute) inequality?: A systematic review," WIDER Working Paper Series wp-2020-152, World Institute for Development Economic Research (UNU-WIDER).
    10. Andrea Albarea & Michele Bernasconi & Cinzia Di Novi & Anna Marenzi & Dino Rizzi & Francesca Zantomio, 2015. "Accounting for Tax Evasion Profiles and Tax Expenditures in Microsimulation Modelling. The BETAMOD Model for Personal Income Taxes in Italy," International Journal of Microsimulation, International Microsimulation Association, vol. 8(3), pages 99-136.
    11. Olivier Bargain & H. Xavier Jara & David Rodriguez, 2017. "Learning from your neighbor: tax-benefit systems swaps in Latin America," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 15(4), pages 369-392, December.
    12. Stefano Boscolo, 2019. "The Contribution of Proportional Taxes and Tax-Free Cash Benefits to Income Redistribution over the Period 2005-2018: Evidence from Italy," Department of Economics 0152, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    13. Avram, Silvia, 2014. "The distributional effects of personal income tax expenditure," EUROMOD Working Papers EM14/14, EUROMOD at the Institute for Social and Economic Research.
    14. Boscolo, Stefano, 2019. "The contribution of proportional taxes and tax-free cash benefits to income redistribution over the period 2005-2018: Evidence from Italy," EUROMOD Working Papers EM18/19, EUROMOD at the Institute for Social and Economic Research.
    15. Jekaterina Navickė & Romas Lazutka, 2018. "Distributional Implications of the Economic Development in the Baltics: Reconciling Micro and Macro Perspectives," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 138(1), pages 187-206, July.
    16. André Decoster & Sergio Perelman & Dieter Vandelannoote & Toon Vanheukelom & Gerlinde Verbist, 2019. "Which way the pendulum swings? Equity and efficiency of three decades of tax-benefit reforms in Belgium," Working Papers 1907, Herman Deleeck Centre for Social Policy, University of Antwerp.
    17. Olivier Bargain & H. Xavier Jara & Prudence Kwenda & Miracle Ntuli, 2019. "Learning from the ʻbestʼ: The impact of tax-benefit systems in Africa," WIDER Working Paper Series wp-2019-2, World Institute for Development Economic Research (UNU-WIDER).
    18. Figari, Francesco & Paulus, Alari & Sutherland, Holly, 2014. "Microsimulation and policy analysis," ISER Working Paper Series 2014-23, Institute for Social and Economic Research.
    19. Thor O. Thoresen & Zhiyang Jia & Peter J. Lambert, 2013. "Distributional benchmarking in tax policy evaluations," Discussion Papers 765, Statistics Norway, Research Department.
    20. Kwabena Adu-Ababio & Robert Darko Osei, 2018. "Effects of an education reform on household poverty and inequality: A microsimulation analysis on the free Senior High School policy in Ghana," WIDER Working Paper Series wp-2018-147, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    Keywords

    Income tax; Tax deduction; Tax base; Japan;
    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:jecrev:v:75:y:2024:i:1:d:10.1007_s42973-023-00125-6. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.