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Comparative analysis of the effective income tax function: empirical evidence using LIS data

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  • Byung In Lim
  • Jin Kwon Hyun

Abstract

The effective income tax function is a useful and practical method to analyse the relationship between income and tax amounts. It includes measures of tax progressivity, the maximum effective tax rate, and the horizontal inequity. The effective income tax function was estimated statistically using the seven countries of LIS datasets and Korean data. The estimated maximum effective tax rate is less than or very close to its maximum statutory marginal tax rate, except for Norway and Korea. This implies that estimation of the effective tax function is of great use and significance in evaluating the charateristics of income tax law. The mean squared error from the effective income tax function can be used to represent the degree of horizontal inequity as a 'quick' measure.

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  • Byung In Lim & Jin Kwon Hyun, 2006. "Comparative analysis of the effective income tax function: empirical evidence using LIS data," Applied Economics Letters, Taylor & Francis Journals, vol. 13(2), pages 117-121.
    • Handle: RePEc:taf:apeclt:v:13:y:2006:i:2:p:117-121
    DOI: 10.1080/13504850500378262
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    Cited by:

    1. Tao Zeng, 2010. "Income tax liability for large corporations in China: 1998‐2007," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 18(3), pages 180-196, September.

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