A Study on Tax Policies for Personal Charitable Donations in China

Zhaohui Long, Wenfei Yang

Abstract


Recently, with the rapid development of charities in China, personal charitable donations mainly from the working class, which is affected by individual tax policies, have grown fast. Based on the survey data from questionnaires about China’s labour force in 2011 by Centre for Social Survey (CSS), Sun Yat-Sen University, this paper studies both individuals tax policies and non-tax factors that would influence personal charitable donations. According to the research, the effective tax rate of the individual income tax has a positive correlation to the amount of personal charitable donations - on which tax deductions policy has an incentive effect. The higher the education level, the more influence the tax deductions policy would have; despite this being weakened by Engel’s coefficient. This influence of tax deductions policy is also weaker, and the incentives of effective tax rate is stronger, on the low-income than the high-income groups. However, both policies would have a stronger influence on areas with a larger income inequality than areas with a smaller income gap

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