ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

Redistributive Effects of Tax Reliefs in Personal Income Tax －A SCV Approach－

  • Ju-Young Lim Department of Taxation, University of Seoul

Asian Tax Journal Vol. 15 No. 2 (2014), pp. 207-226

Abstract

This paper studies how inequality of after－tax income is affected by progressive tax rates andvarious tax reliefs in personal income taxation. We begin with definition of income inequality viasquared coefficients of variation. One advantage of this index lies in natural decomposition ofinequality along with additive components. An additive decomposition of income is after－taxincome and tax, where the final income tax is equal to simple tax amount calculated with nodeductions minus tax exemption from various deductions. Thus, applying squared coefficients ofvariation, one can easily decompose inequality of before－tax income into that of threecomponents；after－tax income, taxes with no deductions, and tax exemption due to deductions. Our empirical analysis, based on two kinds of tax data from National Tax Service and FiscalPanel of KIPF, shows that the redistributive effects of progressive income tax falls by 25isreduced by 22.6% to through 54.9%.

Keywords

  • income inequality
  • squared coefficients of variation
  • income deductions

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