Study On The Mechanism Of Tax By Property Rights Diversification

Chinese tax system is facing the weak growth rate of tax revenue and the imbalance of tax structure: on the one hand, in the past two years during economic restructuring, tax revenue growth rate has emerged signs of decline. In 2013 and 2014, China’s tax revenue growth rate was 9.86% and 7.82%, which was below double-digit growth for the first time since 1994; on the other hand, from the angle of tax revenue structure, in recent years, our goods and services taxes accounted for more than 50%, while the share of income tax accounted for only about 25%. Compared with other major developing countries, this proportion is low.Previous tax policy concentrated on the optimal tax rate and the level of tax administration, which overlooked tax source. In fact, tax source is the basis of the tax system,without adequate tax source, tax system can’t paly effectively even the tax system is designed perfectly. Therefore, it is a basic issue of tax reform that how to optimize tax system through the structure of tax source.In this study, we considered that changes in ownership structure were fundamental changes in the structure of tax sources. The main logic chain was as follows: firstly, as the continuous split and fission of ownership, the market’s radius continued to expand, generated new subjects of property rights and obtained income, which constituted the basis for new tax resource. On this basis, as property rights defined clearly, new tax resource continued to be stabilized and enlarged. Secondly, changes in tax sources further lead to tax structure changes.The reason was because new tax resource needing a new tax structure which could match tax extractive capacity. The core of enhance tax extractive capacity lied in choosing and mixing main taxes, which became the driving force to promote changes of tax system structure.Finally, new sources of revenue basis, complemented by growing tax extractive capacity promoted the expansion of tax revenue together. Expanded tax revenue could make up for the government to the cost of definition and protection property rights. This achieved anevolutionary process namely "property- tax sources- tax structure- tax revenue- property".On this basis, in order to examine this mechanism in reality, this paper made an empirical study on relevant tax changes during Chinese enterprise ownership structure changes, urban land and housing markets ownership structure changes. Firstly, this study reviewed the evolving process of Chinese enterprise ownership structure and analyzed the affecting mechanism of enterprise property diversification on generating and expanding tax resource.Changes of tax resource could influence tax structure, which affected tax revenue, especially income tax eventually. Multiple property rights of enterprise were reflected in two aspects: on one hand, multiple property rights meant diversity of property right bodies. In state-owned enterprises, as property right bodies changed from government to collective, privates and corporates, their legal basis were approved which meant they could managed enterprises independently in some extent. That promoted the information of corporate income tax resource; on the other hand, from the view of property rights function, the nature of property rights subjects transferring from state to collective, privates and cooperates meant that market subjects obtained rights of using, transferring and disposing assets. Furthermore, Using and disposing enterprise property rights could be understood as enterprises’ control rights, while income rights could be understood as enterprises’ residual claim. With the promotion of property rights diversity, corporate control and residual claims by the government were transferred to market, and achieved unity gradually, which not only encouraged production enthusiasm, but also promoted business performance, maximized profits and increased wages.These can affected tax revenues in total and structure through tax resource and tax structure.On this basis, using GMM method, this paper made an empirical study on the relationship between enterprise property right structure diversification and tax revenue, and its structure based on panel data. The diversification of enterprise control right structure and residual right structure were used as explanatory variables to measure the degree of enterprise property right structure diversification here. The result showed that, in the condition of total investment scale unchanged, the increase of investment to corporate enterprises created positive incentives for tax revenue growth rate, especially income tax revenue growth ratw,while the increase of investment to private enterprises created positive incentives for tax revenue, but had no effect on tax structure. In contrast, the increase of investment to state-owned enterprises brought a negative impact on the increase of tax revenue, especially on income tax revenue. Moreover, in the condition of total capital constraint, as the proportion of private capital and corporate capital became higher, tax revenue growth rate, especially income tax revenue growth rate became higher; in contrast, the increase of national capital and the collective capital created a negative impact on tax revenue. The empirical results confirmed the earlier theory proposed that the higher degree of diversification of enterprise property rights, tax revenue, especially income tax revenue would grow faster.What’s more, this paper discussed changes of relevant tax during the transformation process of city land and real estate property rights. In urban land market, land ownership steered from state to both collective and state. At the same time, based on the state ownership,urban land formed a kind of property right structure which took ownership as the core, and separated use right and ownership. As a result, it established new tax resource, promoted tax system improvement, and boosted land value increment tax and urban land used tax grew rapidly. In housing market, property rights reform experienced a process which can be summarized as "limited property rights- part of property rights- private property rights," The essential of this process was transferred property rights bodies from state to collective,corporate and private. This process was called ownership structure diversification. It motivated the transaction of housing market effectively, both in the primary market and secondary market. As a result, it also established new tax resource, boosted building tax and contract tax grew rapidly, and promoted tax system improvement.This paper studied the relationship between property rights structure diversification and tax resource and taxation structure from the aspects of theoretical and empirical method. It was found that property rights were different from ownership. Property rights emphasized the process of exchange profits, while ownership emphasized the possession of property. During the process of property rights structure diversification, ownership was the foundation, on this basis, ownership continue to split into a wide variety of property right. The process ofclarification of property rights was the process of all kinds of subjects getting profits, whose generation came from incentives and the use of idle resources. As a result, new tax resource could be created, thus tax revenue increased and tax structure improved. The conclusions of this paper imply that government’s solution for the problem of tax revenue shortfall and tax adjustment cannot be limited to traditional means such as tax rate or tax collection efficiency.The clarification and protection for different subjects in the process of property rights structure diversification could make each subject remain equal status in trades, thus realizes the unity of rights, responsibilities and profits. Moreover the generation of new tax sources could be promoted, and the tax system further being optimized.This main innovation of this thesis lies in:The first one, the thesis innovates new perspectives. The previous research about macro tax burden and tax structure focused on three aspects, such as economic factors, political factors and the management factors. This article begins from the perspective of tax fund,which is regarded as the fundamental of the tax system. Without adequate tax fund, it can’t cause enough tax fund even if the tax system is designed perfectly. In addition, the changes of tax fund, which equals the changes in revenue structure of main market players, reflect economic structure development. Therefore, we should design the tax system according to the changes of tax fund, so that it can really adapt to economic development with playing an important part in regulating income distribution.The second one, the thesis puts forward the theoretical innovation. Firstly, this article innovates a new way to contact property and tax issues, which breaks through the previous studies on tax problems from perspective of political economy, as well as perspective of neoclassical economics. Due to understanding tax issues from the perspective of property right, we know new property subjects will gain profits in the process of property right structure diversification, with ownership being split and making a fission into a wide variety of property, as well as getting a clear definition on property continually. At this point, these profits make up the basis of tax revenue collection. Additionally, this article attempts to construct a general analytical framework about the effect of diversified property rightstructures on tax revenue. It elaborates the mechanism that property right structure diversification puts an impact on the tax fund from three stages, which are the origin, stability and expansion of tax fund.