Social Sciences in China (Chinese Edition)

No.2, 2020

 

The Influence of Redistribution Policy on Rural Income Distribution—An Empirical Research Based on the Tax and Fee System Reform

 (Abstract)

 

Chen Binkai and Li Yinyin

 

Fiscal and tax policies are essential in promoting economic growth and improving income distribution, but their core functions vary from one stage of development to another. Based on data from the fixed observation points of the Ministry of Agriculture, this paper studies how the reform of the tax and fee system has impacted on rural income distribution, and discusses the role of fiscal and tax policies in adjusting income distribution. As the research findings show, the reduction of taxes and fees significantly improved rural income distribution, explaining the 43 percent—49 percent decrease in income inequality during the periods 1997-2000 and 2005-2008. In early economic development, fiscal and tax policy focused on economic growth; local governments lacked incentives to improve income distribution, and low-income groups had a heavier tax and fee burden and gained fewer benefits from public expenditure. As a result, fiscal policies had a limited redistributive function. As China’s economy and society have entered the New Era, reducing inequality and promoting the full development of economic and social balance through redistribution will become an important function of fiscal and tax policy.