| dc.description.abstract | Laffer Curve examines the relationship between tax rate and tax revenue. It argued that there is a trade-off between income tax rate and income tax revenue. In general, tax revenue will increase as tax rate increase, but there is a limit, when tax rate overpass this limit, tax revenue will decease gradually. This relation is relevant in both policy making and academic study, and our study has examined Taiwan’s labor income in order to understand the possible relationship between labor income in Taiwan and its associated income tax rate. In addition,whether the current labor income tax rates in Taiwan have already reached their peaks in terms of Laffer Curve will also be examined.
The data we used in this study is from Manpower Utilization Survey of 2002, which is compiled by the Directorate-General of Budget, Accounting and Statistics, the Executive Yuan, R.O.C., we used household unit as the unit for our study, and then simulate income tax payment in different tax rates for every family so that we estimate Taiwan’s labor income tax rates around the current labor income level and their possible locations in Laffer Curve.
Our empirical results indicate that every family makes different reactions when they face the change of tax rates. In policy making, increasing income tax rate will make Taiwan’s family’s labors enhance their willingness to work, and expand their work hours so that their annual wage and income tax payment can be increased, government income tax revenue also can be increased accordingly.
In regard to this result, nevertheless, our study recommends that government shouldn’t increase income tax revenue by increasing their income tax rates, instead, the government should increase their income tax revenue by expanding the tax base. It is suggested in this study that the government shouldn`t focus its tax base on paid worker only, possible III underground economic actions such as night market and personal business should be unveiled and they can all added into tax base.
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