Empirical Study on the Income Redistributive effect of Personal Income Tax in China

Abstract

To what extent could personal income tax redistribute individuals’
income is decided by the progressivity and average tax rate of the tax system. This
article analyzed the redistributive effect of personal income tax in China from these
two aspects and obtained the following three judgments basically: First, the legal
and actual progressivity of personal income tax have already reached the developed
country’s level; Second, the average tax rate of personal income tax is significantly
lower than the average rate in the world; Third, the income redistributive effect of
personal income tax is very small compared to other countries. And the core reason
is the too low average tax rate. Therefore, the key point to strengthen the
redistributive function of personal income tax in China is to improve the tax
administration, expand the tax base and increase the average rate of personal
income tax to individuals’ income.