‍Impacts of consumption tax salience on residents’ consumption: an empirical study based on scenario simulations

CHEN Lipeng1 ZHENG Yujie2 XU Jianbin3

(1.Huazhong University of Science & Technology 430074)
(2.Huazhong Normal University 430079)
(3.Jiangxi University of Finance and Economics 330013)
【Knowledge Link】consumption tax

【Abstract】Based on the perspective of behavioral economics and taking the consumption of cigarettes, white wine and cosmetics as examples, the authors make an empirical analysis of the impacts of consumption tax salience on residents’ consumption by the between-group experiment under scenario simulations and the ordered probit model. Research results show that consumption tax salience has significant influences on consumers’ consumption of cigarettes, white wine and cosmetics, in the case of a control over income and some other factors. This means that the propensities of consumers for reducing consumption of cigarettes, white wine and cosmetics will be stronger when consumption tax salience gets higher obviously. Additionally, estimation on marginal effects shows that the marginal effects of consumption tax salience on consumers’ propensities for “probably” and “absolutely” reducing consumption of cigarettes, white wine and cosmetics are greater, compared with those of income and other relevant variables. This means that consumption tax salience has significant impacts on residents’ consumption. Therefore, in order to effectively exercise the role of consumption tax in correcting negative externality and regulating residents’ consumption, China should reform the current consumption tax system, adopting the method of levying consumption tax beyond price, and levy it in retailing, so as to improve consumption tax salience and effectively regulate residents’ consumption and demands.

【Keywords】 consumption tax salience; residents’ consumption; consumption tax reform;


【Funds】 Project of National Natural Science Foundation (71473093) 2015 National University Student Innovation Project of Huazhong Normal University (A2015029) 2015 Science and Technology Research Project of Jiangxi Provincial Education Department (GJJ150449)

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(Translated by YAO Lan)


    [1]. ① The statistics of the Ministry of Finance on fiscal revenue and expenditure in 2015 showe that domestic consumption tax revenue was up to CNY 1054.2 billion in 2015, which increased by 18.4% on a year-on-year basis and accounted for 8.44% of the total revenue tax. [^Back]

    [2]. ① Source: China Tobacco Yearbook (1991–1995) and the overview ofChina’s market in 2014. [^Back]

    [3]. ② Source: 2014 China Youth Tobacco Survey Report, which was released by China Center for Disease Control and Prevention in May 2014. [^Back]

    [4]. ③ Foreign scholars defined “tax salience” as the visibility of tax to taxpayers (or tax burden undertakers). [^Back]

    [5]. ① In this paper, the assumptions that “tax is levied within price” and “tax is levied beyond price” are different from “tax included in price” and “tax excluded in price.” The methods of calculating the latter two are different. But the methods of calculating the former two are the same, and the difference lies in whether its price and tax are separated when a commodity is sold. [^Back]

    [6]. ① Source: the 2013 white paper of Chinese women’s cosmetic consumption, which was released by HealthBeauty and the Public Opinion Research Institute of Renmin University of China and China Industrial Information Issuing Center on December 6, 2013. [^Back]


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This Article


CN: 11-1166/F

Vol 37, No. 07, Pages 34-49

July 2016


Article Outline



  • 1 Problem posing
  • 2 Theoretical analysis and research hypothesis
  • 3 Experimental design and measurement model
  • 4 Empirical test results and discussion
  • 5 Conclusion
  • Footnote