Calculation of optimal tax rate of water resources and analysis of social welfare based on CGE model: a case study in Hebei Province, China

Abstract

The determination of the optimal tax rate of water resources is one of the core as well as the key economic and technological issue in the ‘fee to tax’ work of water resources in China. Therefore, based on the introduction of the computable general equilibrium (CGE) model of water resources tax, using production parameters and consumption parameters of Hebei province in 2008–2017, the optimal tax rate of water resources is simulated and calculated, and the impact of the optimal tax rate on social welfare is analyzed. The results show that the reference of the best water resources tax rate in Hebei Province is 18%, and taxation on water resources effectively promotes the water use structure and water resources utilization efficiency in Hebei, which is beneficial to its water resources protection. The effective calculation of the optimal tax rate of water resources tax in Hebei Province proves the effectiveness of the CGE model in the formulation of water resources tax rate, which provides an important reference for the nationwide popularization of water resources ‘fee to tax reform’ in China and the formulation of water resources tax rate in other regions. Highlights The shortage of water resources and the malpractice of water resources fee policy promoted the water resources ‘fee to tax reform’.; The calculation of optimal tax rate of water resources is the key step of tax reform.; The collection of water resources tax can improve the level of social welfare.; The results show that CGE model is an effective method to calculate the optimal tax rate of water resources.;

Keywords

• cge model
• consumer utility
• optimal tax rate
• social welfare
• water resources fee to tax