The distributional impact of income tax in Canada and China: 1997‐2005

Abstract

Purpose

The purpose of this paper is to examine the distributional impact of personal income tax in Canada and China over the most recent decade.

Design/methodology/approach

The Urban Household Survey in China and the Canadian Socio‐Economic Information Management System data are employed.

Findings

It was found that, in both Canada and China, the personal income taxes are progressive, that is, tax payments and average tax rates are increasing in the income share of high‐income taxpayers.

Research limitations/implications

This paper does not explore the connection between tax progressivity differences and social, political, and cultural differences in the two countries.

Practical implications

This paper is of interest to policy makers, economists, and academics, who seek to design an income tax system which can mitigate income inequity efficiently. Given that income taxes have changed in China in recent years, future studies should be conducted to compare the distributional impacts of the new tax system against those of the old tax system.

Originality/value

This is the first study of distributional impact of income tax in China. This is also the first study to compare tax distribution between China and a developed country.

Citation

Lin, H. and Zeng, T. (2010), "The distributional impact of income tax in Canada and China: 1997‐2005", Journal of Chinese Economic and Foreign Trade Studies, Vol. 3 No. 2, pp. 132-145. https://doi.org/10.1108/17544401011052276