| The industrial structure is closely related to the economic growth. The changes in the industrial structure will result in the improvement of the productivity, which will promote the economic growth; the economic growth in turn will accelerate the upgrading of the industrial structure. The correlation, which exists between the income and the industrial structure, has been testified by the trends of the economic growth in both the developed countries and the developing countries. For subsequent countries, in order to shorten the industrial structure evolution progress and promote the economic growth, it is important to 1) learn the evolution patterns in the leading countries; 2) establish appropriate industrial structure policy; and 3) take actions to "correct" the unfavorable progress and accelerate the upgrading of the industrial structure. As an essential tool in the macro-regulation, tax revenue plays an important role in the industrial structure policy. However, the study of the industrial structure has been separating from the study of the tax policy, which causes the lack of study in 1) the rationale of establishing the industrial structure tax policy; 2) the role of the tax policy in the industrial structure policy; and 3) the impact of the tax policy on the industrial structure evolution progress.There is a great gap between China, a subsequent country, and other industrialized countries. First of all, the long-term planned economy institution in China makes the economy becoming "authority controlled" economy, which causes a great deviation between the current industrial structure in China and the ideal industrial structure under the market economy. The distortion is serious enough to impact the economic growth in China and the industrial structure must be re-adjusted. Secondly, in order to accelerate the economic growth, China as a subsequent country, is trying to shorten the industrial structure evolution progress that took many years to happen in other industrialized countries. All of these require the government involvement besides the marketing adjustment. Therefore, the industry policy plays an essential role in the country' s economic growth. Since the launching of the reform and open policy, Chinese governmenthas established a large amount of industrial policy, including tax policy. However, the systematic analysis of the impact of tax policy on the industrial structure evolution progress has been insufficient. This paper examines the impact of the tax policy on the changes in the industrial structure by combining the industry structure theory with the tax theory; discusses the impact of Chinese tax policy on the changes of the industrial structure based on the profound analysis of the country' s current industrial structure; and makes recommendations to the future industrial structure tax policy in China.This paper focuses on six aspects: 1) the examination of the rationale, objectives, measures and the role of the industrial structure tax policy; 2) the examination of the industrial structure evolution patterns and the optimization; 3) the analysis of the impact of the tax policy on the evolution of the industrial structure from the aspect of demand; 4) the analysis of the impact of the tax policy on the evolution of the industrial structure from the aspect of supply;5) the analysis of the impact of the tax policy on the evolution of the industrial structure from the aspects of foreign investment and the international trade;6) recommendations to the establishment of the industrial structure tax policy in China.The writer believes in the possibility and necessity of establishing the industrial structure tax policies. However, while utilizing the industrial structure tax policies, the market failure and the government failure should always be considered and the profit and the cost should always be analyzed. The goal of the industrial structure tax policy is to promote the optimization and the rationalization of the industrial structure. With the development of the economy, the tax measures, which are acting as the secondary interfering mechanism, will be becoming more and more important in the industrial structure policy.The tax policy utilizes the setting up of tax category, the determination of the basis of assessment, the calculation of 'the tax rate, the selection of the scope of assessment and the tax expenditure to affect the progress of the industrial structure through the way of demand, supply, foreign investment and the international trade. Both the optimization and the rationalization of theindustrial structure are not satisfactory in China. Therefore, the inter-structure of the primary industry, the secondary industry and the tertiary industry should be promoted and the internal structure of each industry should be adjusted. Furthermore, the industries that have high technology intensity, high elasticity and strong industrial association should be considered as a trigger industry. The current industrial structure tax policy plays a positive role in the industrial structure evolution. However, shortcomings still exist. This paper conducts positive analysis through utilizing large amount of data. To optimize Chinese industrial structure tax policy, first of all, in terms of the general direction, it should be done to rectify reverse regulation, to keep relative neutrality, to value harmony, and to optimize instrumentality; secondly, in terms of the detailed actions, the tax burden should be reduced, the current tax categories should be perfected and new tax categories should be added.This paper combines qualitative analysis with quantitative analysis. The study methods used in this paper include the input-output analysis, the correlation analysis, and the comparative analysis. Among these study methods, the input-output analysis is mainly used to analyze the industrial structure. Chinese and Japanese input-output tables are used to calculate related industries' sensibility of dispersion, the power of dispersion, the ratio of intermediate use, the ratio of intermediate inputs, the ration of value added, the coefficient of primary input structure, as well as other indicators. The correlation analysis is mainly used to analyze the association relation between the value added tax burden and the fixed assets and the fixed assets investment in budget and the tax burden. The comparative analysis is used to do various data analysis. The writer tried to combine different study methods to make a reliable conclusion.The paper has two main innovations. First of all, the views of the study and the study methods used are innovated: 1) the writer combines the industrial structure theory with the tax theory, systematically analyzes the impact of tax policy on the industrial structure based on the profound analysis of the currentindustrial structure in China. 2) The writer combines qualitative analysis with quantitative analysis; utilizes different study methods such as input-output analysis, correlation analysis and comparative analysis to provide direct evidence to make the conclusion more reliable. This is very rare in the previous studies of the industrial structure tax policy in China. Secondly, the point of views are innovated. 1) The interfering mechanism of the tax policy on the industrial structure. As a secondary interfering measure, the tax policy interferes with the industrial structure through changing some economic factors and through the impact from the market mechanism. Those economic factors are considered as the media through which the tax policy impacts on the industrial structure. Demand, supply, foreign investment and international trade play the role of the media. The tax policy impacts on the evolution of the industrial structure in many areas through acting on the factors of demand, supply, foreign investment and international trade. 2) The rationale of the establishment of the industrial structure tax policy. There are both possibilities and necessities in the establishment of the industrial structure tax policy. On the one hand, the evolution of the industrial structure has regular patterns and the evolution progress is highly imitable. This makes possible for the government to determine how the tax policy controls the direction of the industrial structure. At the same time, the fact that the tax policy having an influence on the demand, supply, foreign investment and international trade provides the possibility for the tax policy to impact on the industrial structure. Therefore, the establishment and implementation of the industrial structure tax policy are supported by scientific facts. On the other hand, the existing of the public goods, externalities, risk and uncertainty, distribution, and the market failing as well as the implementation of the subsequent country overtaking strategy make the establishment of the industry structure tax policy necessary. 3) the comparison of the tax measures and the policy finance measures. Both the tax measures and the policy finance measures are secondary interfering measures of the industrial structure policy. However, they have different characteristics. The advantage of the policy finance is the centralization of the fund, which provides a goodsupport to the.party who gets benefits. The disadvantages include the limitation of resources, high costs and high risks and the fact that it is only used as prizes. The advantages of the tax measures include larger sphere of action, a variety of means, flexibility, low costs and bad debt risk free. It not only can be used as prizes, but also can be used as penalty. Besides, some of the tax measures can avoid subsidy limitations from WTO. The disadvantage is the limited allowance. Some of the tax allowance measures are more beneficial to corporations that make profits. 4) There is a deviation in the association relationship among the three industries. Firstly, The ratio of intermediate use in agriculture is too small and the forward association effect is too weak. Secondly The sensibility of dispersion of the tertiary industry is too small. To be more specifically, the tertiary industry is not sensitive enough to the national economic growth and the intermediate use from other industries to the tertiary industry is inadequate. Besides, the weight of the tertiary industry in the national economy is too small too. 5) the tax burden is too high. As a result, the government consumption ratio increases, which results in the replacement of the individual preference with the government preference. It will affect the normal evolution of the industrial structure. 6) the relationship between the tax burdens of the value added tax and the utilization of the fixed assets in China. Through the correlation analysis of the value added tax burden (Y) and the net value of fixed assets sales revenue in per 10 RMB occupies (X) in different sectors in all state-owned and non-state-owned above designated size industrial enterprises in 2002 and 2003, conclusion has been made that the value added tax burden has a close positive correlation with the net value of fixed assets. The analysis of 35 industrial sectors in 2002 indicates that the increase of 1% in the net value of fixed assets sales revenue in per 10 RMB occupies will cause an increase of 0.6815% in the value added tax burden in that specific industry; in other words, the net value of fixed assets elasticity of the value added tax burden was 0.6815. The analysis of 38 industrial sectors in 2003 in China indicated that the net value of fixed assets elasticity of the value added tax burden was 0. 6549, which was consistent with the analysis of the data of the year 2002. 7) the industrial tax allowancein China is not detailed enough. The current tax favorable terms in China are applicable to all productive foreign funded enterprises. However, the scope of the productive foreign funded enterprises is not consistent with the praised industries in the Foreign Investment Guide. 8)The general route to optimize Chinese industry structure tax policy, firstly, to rectify reverse regulation; secondly, to keep relative neutrality; thirdly, to value harmony; fourthly, to optimize instrumentality. 9)to perfect the foreign investment tax allowance policy in the corporation income tax. Fistly, To lower the general preferential level. Secondly, To minimize the area differences. Thirdly, The industrial preferential rules should be consistent with the country industrial policy. Fourthly, too specify the industrial preferential policies and fifthly, to reform the tax expenditure that is related to foreign investment.
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