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The Incidence of Indirect Tax in China: Mechanism and Measurement
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TitleThe Incidence of Indirect Tax in China: Mechanism and Measurement  
AuthorWang Hao and Lou Feng  
OrganizationCentral University of Finance and Economics;Institute of Quantitative & Technical Economics Chinese Academy of Social Sciences; 
Key Wordsindirect tax;tax incidence;progressivity;computable general equilibrium (CGE) 
AbstractReplacing the traditional method with the general equilibrium method of indirect taxes incidence, we assume the indirect tax incidence of household includes two aspects: the sources-side of income and the uses-side of income. Based on theory analysis of indirect taxes incidence mechanism,we further constructed a computable general equilibrium model and measured the main indirect taxes on the rural and urban households in different income groups using the method of difference tax incidence. The research results show that the conclusions of the traditional method is invalid: the entire tax incidence in the urban and rural among household groups is U-shaped, and the incidence of rural household is heavier than that of urban household. Moreover, influence of the sources-side on the entire tax incidence is greater than that of the uses-side, so that the progressivity of entire tax incidence is closer to the sources-side. The gaps of income and expenditure pattern among household groups play a vital role in the change of progressivity of tax incidence. In addition, Factor substitution elasticity has negative impact on sources-side incidence and its progressivity, but affects uses-side incidence positively. Finally, this paper puts forward the corresponding policy recommendations on the adjusting the tax gap between households from the aspects of the results、causes and related factors. 
Serial NumberWP979 
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