Journal Article: "Does Lower Taxation Rate Lead to More Tax Revenue? Evidence from Wartime Excise Taxation in the Republic of China (1942-1945)"

Title: Does Lower Taxation Rate Lead to More Tax Revenue? Evidence from Wartime Excise Taxation in the Republic of China (1942-1945)

Authors: Zhiyin Xu, Hanhui Guan, Yuezhuo Chen, Jie Mao

Language: Chinese

Publication: China Economic Quarterly, Vol. 23, No. 4, July 2023, 2095-1086: 1634-1652

English Abstract: 

We collect data of excise taxation in the Republic of China (1942-1945) and test the hypothesis of "Lower Taxation Rate Lead to More Tax Revenue". We find the hypothesis is based on the price elasticity theory. When tax rate reduced by 1%, tax revenue from the commodities with higher elasticity increases less than those with lower elasticity. Our study explains why wartime excise taxation had to be ended. If government aimed to maximize tax revenue, most of which would come from daily necessities, this would lead to more social instability. The paper can provide some suggestions for contemporary Excise Taxation reform.