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Title The Estimation of Effective Income Tax Function in Korea: 1998-2005

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  • Date
    2007-05-09

This study empirically estimates the effective tax function, the nonlinear relationship between individual effective income tax rates and economic income, in Korea by using the Household Survey Data 1998~2005. This paper exams them along with the Gouveia and Strauss(1994)' methodology, in which the incentive compatible tax function is estimated based on equal sacrifice principle.

Estimating Results are as follows; asymptotic effective income tax rates for household heads by year are from 20.50 to 26.78%. After-tax income elasticities with respect to before-tax income for household heads by year are from 0.9427 to 0.9600. From these results, it is found that the degree of income redistribution is almost 5%. The elasticities income tax revenue with respect to income for household heads by year are from 2.5176 to 3.2292. Simple average marginal income tax rates for household heads by year are from 0.0553 to 0.0823 and income weighted average marginal income tax rates for household heads by year are from 0.0904 to 0.1220.

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