Abstract
This paper uses Gini coefficient, concentration coefficient and extended linear expenditure system, studying effects of indirect tax incidence to the income gap. Using data from the city household survey of Liaoning Province, we studied the incidences of three major indirect taxes in different income groups. The three taxes include value added tax, consumption tax and business tax. We found that the lowincome families pay more percentage of their income as indirect tax than the high income families. The indirect tax is degressive, expanded the income gap. Based on this: should adjust and improve indirect tax, should have a choice of high elastic goods and services tax levy, reduce low elastic of goods and services tax rate, and continue to improve and intensify the low-income financial transfer payment.
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