Impact of Changes in Effective Tax Rate Structure on Fiscal Deficits from a Fiscal Security Perspective
This study recalculates the average effective tax rates of capital,labor,and consumption in Chi-na from 1994 to 2017 using improved methodologies.Based on these calculations,the SVAR model is employed to investigate the impact of variations in the effective tax rate structure on fiscal deficits.The results indicate that increasing the average effective tax rate on consumption can enhance China's fiscal condition in both the short and long term.Elevating the average effective tax rate on capital only leads to fiscal improvement in the short term,while raising the average effective tax rate on labor does not result in any fiscal improvement in either the short or long term.Therefore,potential policy strategies for structural tax cuts and fee reductions in China in-clude:(1)ensuring the stability of the average VAT rate while promoting VAT rate consolidation and reduc-tion,and reforming and enhancing the environmental protection tax system;(2)increasing consumption tax rates on goods harmful to the environment and human health,and expanding the scope of the consumption tax to include more luxury items and services;(3)enhancing the consumption capacity of the elderly by supporting the development of the aging industry and improving social security levels;(4)refining the current personal in-come tax system and improving tax administration conditions,broadening the taxation of personal capital in-come,and considering the implementation of additional taxes on the wealth of natural persons;(5)streamlining existing complex tax incentives related to corporate capital elements,plugging tax loopholes,and establishing a standardized,orderly,and rational tax incentive system.
fiscal securityaverage effective tax ratedeficitSVAR model
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