Urban and rural household taxation in China: Measurement, economic analysis and policy implication.

摘要

In this research, I measure the tax burden—the level of taxation relative to income—for both urban and rural households. I find that, in general, the taxes that Chinese urban households pay are mainly indirect taxes such as the value added, excise taxes and consumption taxes, in addition to a small amount of direct taxation (personal income tax). Taxation on rural households is largely direct, in the form of agricultural-related taxes, local fees and educational charges. I find that rural households are taxed more heavily than urban households relative to their respective incomes. I find that rural household taxation is much more regressive than urban household taxation, mainly due to the highly regressive nature of the rural direct taxation, and that the rural direct tax rates did not increase very fast in the 1990s. The main reason that rural direct taxation became an acute problem in the 1990s is the increase of rural income disparity in the 1990s and the uneven distribution of tax and fee obligations among different income groups. The relationship between government regulations and rural direct taxation is studied in a general theoretical framework. I find that government regulation on the food markets is an important factor in explaining rural direct tax burdens. The reason is that the regulation entails costs not only in policy implementation, but also in corruption, since local officials can impose extra charges on peasants in the name of implementing the central government's regulation. I test the empirical hypotheses that regions and households more heavily regulated in grain procurement tend to have heavier rural direct taxation, more vulnerability to local bureaucratic expansion and serious corruption, lower labor and land mobility, and as a result of these, lower income growth. The data strongly support the hypotheses. Policy implications are drawn from the findings.