The distributional impact of income tax in Canada and China: 1997‐2005
| Date | 22 June 2010 |
| Pages | 132-145 |
| DOI | https://doi.org/10.1108/17544401011052276 |
| Published date | 22 June 2010 |
| Author | Horn‐Chern Lin,Tao Zeng |
| Subject Matter | Economics |
JCEFTS
3,2
132
Journal of Chinese Economic and
Foreign Trade Studies
Vol. 3 No. 2, 2010
pp. 132-145
#Emerald Group Publishing Limited
1754-4408
DOI 10.1108/17544401011052276
The distributional impact of
income tax in Canada and China:
1997-2005
Horn-Chern Lin
Strategic Research Unit, Office of the Budget and Taxation,
Ontario Ministry of Finance, Toronto, Canada, and
Tao Zeng
School of Business and Economics, Wilfrid Laurier University,
Waterloo, Canada
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.
Keywords Income tax, Canada, China, National economy
Paper type Research paper
1. Introduction
Personal income tax is a commonly used public policy instr ument when the objective
of the government is to alter after-tax income distribution. Other forms of taxes, such
as sales tax and corporate income tax, which are ultimately borne by househo lds, also
affect after-tax distribution. This paper studies recent trends in the distribution of
income tax and compares this distribution in two countries: Canada and China. Using
the Urban Household Survey in China and the Canadian Socio-Economic Information
Management System (CANSIM) data from Statistics Canada, this study:
.examines how income tax burdens are distributed among income groups;
.calculates the average tax rates for each income quintile; and
.compares tax progressivity in Canada and China.
It indicates that, in both countries, the personal income taxes are progressive, that is,
tax payments and average tax rates are increasing in the income share of high-income
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The authors thank two anonymous reviewers for their insightful comments and suggestions.
The second author acknowledges that financial support for this research was received from
CA/Laurier University Centre.
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