Even if the consumption tax is 10% and social insurance premiums remain as they are, and even if income tax and corporate tax are reduced to 10%, the tax revenue will not change due to the ruffer curve.
Summary
A summary
This white paper shows a simulation based on the idea of the ruffer curve for tax revenue when the income tax rate and corporate tax rate are reduced to 10% while maintaining the consumption tax rate of 10% and social insurance premiums at the current level. .
In this analysis, under certain prerequisites, even if income tax and corporate tax were reduced to 10%, tax revenue was maintained at the current level.
⸻
Simulation conditions
● Consumption tax: 10% (current maintenance)
● Social insurance premiums: Maintain the current level
● Income tax: 10%
● Corporate tax: 10%
● Analysis using the idea of the Ruffer curve
● Tax revenue is estimated taking into account changes in the tax base
⸻
Simulation results
In the simulation, even if the consumption tax and social insurance premiums are kept as it is, and income tax and corporate tax are reduced to 10%, the tax revenue will remain at the current level under the assumption of the ruffer curve.
This result assumes that economic activity will be activated by lowering the tax rate and taxable income and profits will increase.
⸻
Policy issues
If the premise of this simulation is valid, the following policy questions arise.
If tax revenue can be maintained even if income tax and corporate tax can be reduced to 10% while maintaining 10% consumption tax and social insurance premiums, why is the government adopting a higher income tax and corporate tax rate than it is now?
In this regard, it is important to explain what kind of economic model and tax revenue maximization tax rate the government assumes from the perspective of policy transparency.
⸻
Conclusion
This white paper presents a simulation result based on the Ruffer curve.
The conclusion of this result may change depending on the prerequisites and the validity of the model, so additional verification is required for actual policy decisions. On the other hand, it is beneficial to deepen the discussion on the relationship between tax rate setting and tax revenue, including the ruffer curve and the tax revenue elasticity value, in considering future tax systems.