This study focuses on developing a model that evaluates efficiency and equity of supplying public fund by tax. Tax distorts resource allocation and income distribution, and then, it affects economic efficiency and equity. In addition, the tax affects current and future price system, and thus, it affects intertemporal resource allocation and equity between current and future generation. Considering various effects of tax, analyses should be limited in partial equilibrium models. Hence this study builds dynamic computable general equilibrium model (DCGE) for multisector and multiclass.

Until now, domestic and foreign studies of empirical analysis have been criticized in that, depending on simple models due to data availability, their analysis results are unrealistic and they are unlikely to be applicable. This study overcomes these problems, however. Using data available currently, this study constructs a model that can make timely evaluation on frequent tax revision or fiscal policy change. In this study, the model is composed of 27 industry sectors, 12 comsumption goods, 7 capital goods, decile-of-income classes. Subdividing capitals and reflecting taxes related to them according to the feature of Korea’s capital taxation, this model constructs the base for evaluating effects of capital taxation policies more reasonably. It reflects income tax and consumption tax as well. The income tax is subdivided into earned income tax, dividend income tax, capital gains tax, business income tax, aggregate income tax. For the consumption tax, the model reflects value added tax, individual consumption tax, cigarette tax, liquor tax, transport, energy and environment tax that can become subject to tax revision. This model have advantage to analyze the effects of tax revision related to corporate tax, income tax, and comsumption tax in income distribution as well as efficiency.

Using the model, this study analyzes income redistribution, tax incidence and macroeconomic effects for a 2%p increase in corporate tax. The summary of analysis results is as follows. If the corporate tax increases by 2%p, the surplus is - 8,754.7 billion won, the consumer surplus - 2,873.9 billion won, and the producer surplus - 5,880.7 billion won at annual average for the next three years. Thus, it is predicted that the consumers bear the corporate tax burden at 32.8%, and the producers at 67.2%. It is analyzed that the producer surplus is to labors at - 16% and to capital owners at - 51.2%. Again, it is predicted the capital surplus is to dividend at - 4.5%, to equipment and building at - 21%, to land at - 0.8%, to intangible and cash and cash equivalent asset at - 30.9%, and business income at 6%. It is analyzed that, if the corporate tax increases, the income redistribution gets worse as the Gini coefficient increases by 0.02~0.034%p. This is why the width of decrease in earned and capital income happens to be larger at the low income class. It is predicted that, if the corporate tax increases, the consumer price increases by 0.12%, and GDP decreases by 0.33%.