The construction of the four income measures requires putting together several fiscal interventions. Table B2 in the appendix provides a list of all the interventions included in our analysis, indicating whether the information used was directly available in the household survey or needed to be imputed or simulated, when either the status (beneficiary/payer) or the amount received/paid was not reported directly in the survey.

The total amounts of revenue or spending from the survey (including imputations) do not always coincide with those from administrative data. This is to be expected. For many cases, these total amounts are nevertheless, comparable. But the range is wide and, in some cases, it is worth explaining the possible reasons behind the differences. For instance, the total amount of the personal income tax allocated or retrieved from households in the survey is about 57 percent of the total amount in the administrative dataset. In part, this reflects the limitation of household surveys to adequately capture information on the households at the top of the income distribution due to underreporting or non-response of rich households. The calculation of VAT provides another example of the data limitations. The VAT amount included in the analysis accounts for only 38 percent of the amount in administrative records due to the exclusion of durable goods from the analysis and the fact that final consumption of households only makes up for a portion of the total VAT. This is, however, a limitation that is standard for this type of analysis and as is recommended practice, for each of the fiscal components modeled in the analysis we present a detailed analysis of macro-validation in Appendix B.

# Results

Combining households’ contributions and benefits to the fiscal system, five key features emerge. These features are summarized in Figures 4 and 5. Figure 4 shows the average taxes and contributions paid per year by each household market income decile (with bars below the horizontal axis), the average benefits received (bars above the horizontal axis) and the net impact (red dots), expressed in RMB. Figure 5 contains the same information, but contributions and benefits are expressed as a share of households’ final income.

**First, the Chinese fiscal system is overall progressive** . In absolute terms, poorer households receive a positive net benefit (receive more from the fiscal system than what they pay into it) while the net benefit position becomes more and more negative higher up the income distribution. Overall, with net fiscal position in the positive, more than 70 percent of the country’s population is net beneficiary of the fiscal system. The fiscal system is also progressive in relative terms, especially with respect to in-kind education and health benefits that favor the relatively poor (Figure 5). Two observations are noteworthy. First, in gross terms, the overall value of the benefits received are worth quite a lot to households that receive them. For households in the poorest decile, for example, the total value of benefits received through the fiscal system is almost as large as their pre-fiscal income. Second, the value of the benefits declines as one moves up the income distribution, that is, the benefits account for a smaller share of pre-fiscal income as households become richer.

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