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Research on the Economic Effects of Excise Taxation in China

Author: MengYingYing
Tutor: YinYinPin
School: Southwestern University of Finance and Economics
Course: Taxation
Keywords: excise taxation effect mechanism economic efficiencynegative externality
CLC: F812.42
Type: PhD thesis
Year: 2012
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Quote: 1
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Abstract


Because of the alternative of range of collection, the flexible way of collecting, the difference of the tax rate and the transferable of the tax burden, the excise taxation is called the "good taxation" by the scholars. At the same time, the excise taxation is the important tool of macroscopic adjusting control of the government. The excise taxation in China was established in the tax reform in1994, and was on the base of partial product-tax and special excise taxation. It represented the government’s special adjustability on some special goods. Since it was established in1994, in order to developing the excise taxation function of microscopic adjustments, the government had carried out a number of adjustments. What economic effects of adjustments can produce? In order to providing reference for the following-up reform, this paper explored real economic effects of excise taxation from the angle of micro and macro, efficiency and justice.The text is divided into ten chapters, including theoretical and practical analysis, empirical test and the optimization method of policy. The first chapter is introduction. The chapter2and3are the basic theory of excise. From the fourth chapter to the ninth chapter are the part of empirical analysis. The tenth chapter is the comprehensive evaluation and optimization proposals on the excise.Chapter1is the introduction. This chapter covers describing the background and meaning of topics, reviewing domestic and foreign literature, introducing to the methods of study and the structure arrangement, pointing out the innovation and weakness of this paper.Chapter2is the general analysis of the economic effects of the excise. Using the normative analysis method, we firstly have a general analysis of the excise, including the definition, target and so on. Secondly, we analyses the process of excise system run, reveals the internal mechanism of economic effect of excise, which provide the basis for empirical analysis. Finally, we analyze the tax burden on the different market conditions. Chapter3is the practice analysis of the excise. We firstly analyze the practice of the excise in China from the history and development trend. And then we have an international comparison of excise in order to provide reference for the continuous improvement of the excise.Chapter4is the empirical analysis of excise tax burden. The chapter explores the tax burden from the perspective of supply and demand elasticity. At first, we construct the theoretical models to measure the supply and demand elasticity. And then we use the consumption data and enterprise of input and output data to analysis the elasticity. On the basis of the empirical analysis, we estimate the share proportion of tax burden between the producers and consumers.Chapter5is the empirical analysis of the influence of enterprise output about excise. This chapter analyzes alone the thought of excise taxation policy changing→price changing→the profits changing. On the basis of introducing the change of excise taxation into the model of supply function, we analyze the short-term effect of supply on the change of excise taxation policy through numerical simulation. And then we use the VAR model analyze the long-term dynamic effect of profit on the changes of excise taxation policy.Chapter6is the empirical analysis of the consumption effect about the excise. This chapter analyzes alone the thought of excise taxation policy changing→price changing→demand changing. We construct the consumption effect model which contenting the changing of excise taxation through introducing the CES consumer utility and the C-D production function. And then we analyze the consumption effect of the excise by empirical study.Chapter7is the empirical analysis of correcting negative externalities effect about the excise. This chapter analyzes alone the thought of excise taxation policy changing→price changing→the negative externalities changing. We firstly construct the correcting negative externality model about the excise according to pigou tax. And then we simulate the correction negative externalities effect about the excise on the base of the result of the consumption in chapter6.Chapter8is the empirical analysis of the economic growth effect of the excise. This chapter reveals the relationship between the economic growth and the excise from the macroscopic level of efficiency. At first, we added the excise into the endogenous economic growth model and set up a new economic growth model with three sector including families, enterprises and government. And then we simulated the relationship between the excise and economic with Matlab software. Second we constructed the VAR model to empirically test the dynamic relationship between the excise and economic growth.Chapter9is the empirical analysis of the income redistribution effect of excise. First we constructed the theory model to measure the excise tax’s income redistribution effect on the base of Kakwani (1977). Then by calculating the K index and the average tax rate, we empirically test the income redistribution effect of excise from an overall point of view and from the angle of structure.Chapter10gave the suggestions of the optimization of about the excise. We summary the economic effects of the excise which is severed as a basis for policy recommendations. Second, we expounded the further reform goal and the optimization of the excise according the empirical results of the economic effects of the excise.Through an expandedness and in-depth study on economic effects of excise, this paper may make a number of innovative explorations in the following aspects:1. The in-depth of theoretical analysesThis is a complicated process that the changes of excise impacted the micro economy, and then affect the operation of the macro economy. We introduced the excise taxation into the basic models that combined with the theory of microeconomics and macroeconomics regulation, endogenous growth and IS-LM model. Through these theoretical models, we deduced the action process and the mechanism of the economic effect of excise, and then we set up the theoretical framework of excise’s economic effects. Specific reflects in:the changes of excise taxation policy generate the income effect and substitution effect between the producers and consumers through the price mechanism. These have an impact on the behavior of producers and consumers. The changes of consumers’behaviors would affect the negative externality that was generated in the process of consumption. These could reflect the negative externalities correction effect of excise. The changes of production, consumption, investment and saving behavior would directly or indirectly affect the operation of the macro economy, and produce certain effect to economic growth. At the same time, the collection and the use of excise could regulate the income gap, and have the income distribution effects.2. The in-depth of theoretical models(1) This paper expanded the consumption effect model of the excise. First, this paper set up the consumption effect model of the excise by choosing the most general CES utility function, and discussed the influence of the consumption choice with the changes of excise taxation policy. Second, this paper expanded the production function model of the excise by choosing the C-D production function, and discussed the consumption choice of the taxable goods as an intermediate factor of production, with the changes of excise taxation policy.(2) This paper expanded the supply function model of containing the excise. Literatures from the point of view of the tax to research enterprise output and supply are few:Based on the based of enterprise production function, this paper deduced the supply function model that including the factor of excise and to provide the theory basis for exploring the influence of excise tax on the enterprise production.(3) This paper expanded the economic growth model of including excise. The study on the economic growth is more, one of the most representative is the Barrow’s model of economic growth. This paper introduced excise on the based of the Barrow’s model of economic growth. Through the deduction of the model, we draw the theoretical model of relationship between the excise and the economic growth rate.3. Depth of empirical researchOn the basis of theoretical analysis, this paper empirically studies economic effect of excise from different perspective using the experience data of China and measurement tools.(1) This paper empirically studied the excise burden between the producers and consumers. From two angles of supply and demand elasticity, this paper empirically analyzed the share proportion of excise burden between the producers and consumers. The results found that different excise taxable items of tax burden share different proportion between producers and consumers. Most of the cigarette and alcohol excise burden are bearing by consumers, while the automobile and fuel excise burden are bearing roughly equal between producers and consumers.(2) This paper empirically analyzed the impact of excise on the enterprise output. Based on the derivation supply model that containing the excise, this paper empirically analyzed the effect of enterprise output when the changes of excise taxation policy. At the same time using the impulse response function and variance decomposition analysis, this paper analyzed the dynamic process of enterprise sales revenue, with the changing of the excise taxation policy. The results show that different influences on different taxable production. Cigarette excise on cigarette production enterprise of regulation is effective, while alcohol excise on alcohol production enterprise of regulation is ineffective. Fuel excise on petrochemical production enterprise can rise to a short-term effect, and the influence of the automobile excise on auto enterprise reflected in adjusting the structure of the product, not to control the total amount.(3) This paper empirically researches the consumption effect on excise. When the domestic scholars’studies the consumption effect of the excise’s reform, most of them used the normative research, that lack of empirical test. Based on the theoretical model of CES utility function, this paper used the experience data and metrological tools, and empirically investigated the consumption effect on the taxable goods, with the changing of excise. The result showed the control effect of cigarette excise taxes on cigarette consumption is more obvious, while the smaller control efforts of the alcohol excise tax on alcohol consumption. Vehicle excise showing differences in the regulation effect of the different displacement car consumption, relative to the high displacement vehicles, the consumption of micro-car is not sensitive to changes of excise. Fuel excise was effective when to control the enterprises’consumption, but was failure when to control the consumption of customers.(4) This paper empirically inquired into the correction of negative, external effects of excise. Base on the empirical results of the chapter6and the selection index, this paper inquired into the correction of negative external effect of excise. The result showed that after a number of adjustments, the correction of negative external effects of excise had become more prominent. In addition to the corrective effect of the alcohol excise was relatively weak and did not have continuity, the other taxable item, in particular the corrective effects of the vehicle excise and fuel excise were more significant, the environment effects of the excise in China has become increasing prominent. (5)This paper dynamically simulated the economic growth effect of excise. Using the Matlab software, this paper dynamically simulated the relationship between the excise tax rate and economic growth rate. The results showed that the excise and economic growth is positively correlated, and the influence on economic growth had a period.(6)This paper empirically study the income redistribution effect of excise by the K index and the of average tax rate. From an overall perspective, the excise in China became progressive and can play a regulatory role in the income gap since2007. From the perspective of structure, we studied the effect of redistribution of the taxable items, and found that the cigarette and alcohol excise were always regressive, deterioration of the income gap between residents, while the vehicle and fuel excise were progressive, conducive to narrowing the income gap among the residents.4. The applicability of optimization measures(1)According to the empirical results and policy practice, this paper put forward the short-term and long-term goals of the excise tax reform. The short-term goals for excise’s reform are to focuses on the economic regulation function and taking into account its regulation effects on the income gap between residents. That is correcting the demand deviation of consumer, guiding people to establish a health consumption concept, and constantly improving the design of the excise tax in order to improve the environment. The long-term goals for excise’s reform should be helpful to the economic and social sustainable development. The limited excise system should transform to the intermediate excise system, we should build the "green" excise, and at the same time increase the luxury tax in order to play the redistribution function of excise.(2) From a long-term perspective, this paper suggested that the cigarette excise rate should be increase gradually, in order to achieve "prohibition". At the same time, this paper suggested the specific tax of alcohol excise should be increased gradually, and the ad valorem tax should be set differential rates according the price.

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CLC: > Economic > Fiscal, monetary > Finance, the state's financial > China's financial > Financial income and expenditure > Tax
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