On March 25, 2019, "international seminar on micro simulation and micro simulation report conference of individual income tax" was held at the Jingshi Hall of Beijing Normal University. Professor Seiichi Inagaki, from Japan’s International University of Health and Welfare and the principal researcher Chang-Won Ahn of ETRI software and Content Research Laboratory in South Korea, Zhu Ling, a professor at the Chinese Academy of Social Sciences as well as others from different governmental departments, organizations and universities attended the meeting.

First of all, dean of the School of Business, Qi Yudong, gave a speech to welcome the participating experts.

Then, Li Shi, executive director of the China Institute of Income Distribution, introduced the progress of "micro simulation model of income distribution in China".

Wan Haiyuan, vice President of China Institute of Income Distribution, presided over the press conference of micro simulation report on individual income tax, and Zhan Peng, researcher of public policy evaluation and simulation center, reported the main results of the report.

Since 2015, the China Institute of Income Distribution has actively established a "micro simulation model of income distribution in China", which is connected with the world's leading micro simulation model of income transfer payment in Australia (STINMOD+). On this basis, the CIDMS model is used to evaluate the individual income tax reform in China in 2018. The reform of personal income tax in 2018 has made great breakthroughs compared with previous reforms, including three highlights in particular: merging some income sources into comprehensive income, raising the exemption amount of comprehensive income, and adding special additional deductions.

According to the simulation analysis of the research group, the comprehensive income can obtain higher income redistribution effect under the lower average tax rate, which should be the direction of the future personal income tax reform. The new income tax is expected to reduce government income by 580.4 billion yuan, of which 46.7 billion comes from special additional deductions. But it is expected to return to 2018 levels around 2023. The new income tax reform also reduced the redistribution effect of income tax by 0.7 percentage points, equivalent to 38 percent of the redistribution effect before the reform. If the current rate of income increase is maintained, the rate of income redistribution is relatively slow. The research team also found that the special additional deduction amounts to an increase in exemption for some people, resulting in a 5.5 percentage point reduction in personal income tax coverage and a 0.21 percentage point reduction in the average tax rate.

The China Institute of Income Distribution also worked with NATSEM at the University of Canberra to compare individual income tax and income transfer policies between China and Australia. Through the simulation analysis of the typical family, it is found that the Chinese policy is less inclined to the low and middle income groups than the Australian policy. The differences are particularly large among families with children in school. The main reason is that similar policies in Australia fully consider factors such as family labor income, labor time and family burden, and can effectively target low-income families.

Children's education accounted for about half of the six special additional deductions under the 2018 personal income tax reform. Given the importance of child education and child rearing the report simulates the impact of Australia's child subsidy policy on families of different income groups. The study found that the special additional deduction for personal income tax in China is still not enough for low-income families. In order to improve the social security policy for low-income families, we should implement the individual income tax policy and the subsidy policy targeted at low-income families. Australia's child care subsidy policy determines the subsidy amount according to parents' income, working hours and care costs, which has great reference significance.

Liu Hanjun, director of the State Taxation Administration, thanked the research team for their contribution to the reform of China's individual income tax. Liu mentioned that before the reform in 2018, the State Taxation Administration also carried out the preliminary assessment of micro simulation analysis of individual income tax. Some of the core work came from the support of China Income Distribution Research Institute of Beijing Normal University, hoping to strengthen the cooperation and exchanges between the two sides in the income tax reform in the future.

Prof. Chang-Won Ahn, Prof. Seiichi Inagaki, Prof. Zhu Ling, Prof. Wang Guocheng and Prof. Zhang Yanqun spoke highly of the contents of the report and put forward suggestions on more research directions. Experts suggested to further explore the heterogeneity among different groups and pay more attention to the tax problem of special groups. At the same time, it is suggested that the reform of personal income tax be further discussed in the framework of overall tax system optimization, and comprehensively consider the impact of tax reform on efficiency, innovation, poverty reduction and income distribution. Experts say the goals of different types of tax or transfer payments are not the same, with some aimed at reducing poverty or ensuring the living standards of low-income families, and others at providing incentives. The construction of individual income tax and transfer payment system needs to distinguish different goals and requirements and implement specific reforms according to appropriate evaluation methods.

The second part of the conference is the international symposium on micro-simulation. Micro-simulation experts from Japan, Korea and China introduced the development and achievements of micro-simulation analysis of public policy in Japan, the problems of medical insurance reform in China, the simulation model of social integration of the dynamic process of public policy in Korea, and the reform of corporate income tax in China. At the same time, the meeting discussed the continued regional micro simulation discussion mechanism of China, Japan and South Korea, hoping to enhance the public policy evaluation capacity of China, Japan and South Korea and form policy consultation suggestions more conducive to regional livelihood and welfare through strengthening academic exchanges.