Payroll pre-tax deduction and salary arrangements of enterprises


HAN Xiaomei;GONG Qihui;WU Liansheng


Nanjing University of Science and Technology;Zhejiang University;Peking University


The income distribution effect of tax policies has been a hot issue for the policy makers and academia. Taking the payroll pre-tax deduction reform in 2008 as the background, we studied the effect of lower payroll tax costs brought about by the reform on salary arrangements of enterprises. The findings showed that the reform has led to a reduction in payroll tax costs, which results in a rise in the total wage of employees, specifically, the increased average wage rather than the increased number of employees. The reform mainly increases the salary level of ordinary employees and reduces the income gap between senior executives and ordinary employees, ultimately improving the total factor productivity of the enterprise. The above effects are more pronounced in enterprises with a lower level of wage, non-state-owned enterprises, and enterprises with lower dividend payout ratios. In sum, our findings suggested that the payroll tax deduction reform has a positive effect on income distribution and then improves the enterprises’ productivity.


payroll pre-tax deduction;income gap;productivity


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Total: 25 articles

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