Intergovernmental Tax Competition Issues Research

Since the People's Republic of China was founded, economic interests have long been scrambled for among all levels of government. During the planned economy phase, the focus of competition among the local governments was on lobbing the central government into rendering more investment projects and financial appropriation to them. The battlefield for this competition lied largely in the non-system level of the central government. With the widening of the gaps among different areas in China after China's reform and opening up policy, local government officials have showed more concern with the economic index and public finance interests within their own ruling areas and the political and economical competitions have been increasingly intensified among all levels of government. Nevertheless, the tax separate system reform in 1994 clarified the local fiscal power and provided the standards and conditions for economic competition, among which taxation competition is the main means to this end. During this course, different levels of government adopted the differentiated taxation policy as the basic means and various economic and non-economic means in order to compete for and control over taxation resources. This would hopefully lead to attracting investments, increasing financial revenue, and stimulating local economic growth, etc. The taxation competition has been carried out vertically and horizontally among central government and local governments, local governments and intra -governmental sectors for a decade. The means and scale of the competition have been also expanded. Scholars of the theory community began to show more interest in this newly emerging subject "intergovernmental taxation competition".Theoretically speaking, a good intergovernmental competition has many good effect, these are: it is instrumental to governmental innovation and economic expansion, it is good for the increase of governmental operational efficiency, it is helpful in the increase of tax payers' interest, and it is also instrumental to the constraint of inefficient governmental intervention. But currently, under the condition of lack of legislative correction, ineffective fiscal system,and ineffective local governmental competition, intergovernmental tax competition could bring out many problems. These problems are: many local governments lower their practical tax rate, and the tax revenues were reduced; tax burdens were affected, and the principles of tax equity and tax neutrality are affected; the function of tax regulation is affected; the effectiveness of tax collection is affected; inefficient tax competition affect the equalized development among different regions. Along with the WTO accession and the opening up of our country, various levels of government in our country face the challenge of enhancing cooperation, coordination, so as to meet the challenge of international competition. Therefore, correctly explain, evaluate tax competition in our country become an important practical and theoretical issues.Now the researchers do more in the international tax competition than in the inter-governmental tax competition in our country, which is in the start stage. The domestic researchers are in agreement about the concept, the kinds, the theory source of inter-governmental tax competition, but they have paid more their attentions on the analysis in theory field and on the reasons than on the actuality and the effect of tax competition in our country, it has been done less in the reform route an ideas of regulating the inter-governmental tax competition.Based on others, this article starts from the inter -governmental competition and the reform of finance and taxation in our country deeply, makes clear the reform of political and economic reform, the development of finance and taxation system, the notion of government public service, the building of supervise mechanic, conceives the systems and suggestions to regulate the inter-governmental tax competition in our country.This paper tries to do some work as bellow:Firstly, it debates the general theory of inter -governmental tax competition. The content includes the concepts of inter -government tax competition and the fund supplements of public goods. Then it analysis the actuality and the development of international tax competition, talk about the basic factors and reason of inter -government tax competition. At least it analyses the catalogue of the inter-governmental tax competition.Secondly, it analyses the effect of inter-governmental tax competition. The effect of inter-governmental tax competition is the deep affections of tax competition on the society and economics during the fluency of the produce factors and tax revenue. This part concentrates on the general effect of intergovernmental tax competition, analyses the three models of inter-governmental tax competition, at last this article talks about the effect of factors fluency on the inter-governmental tax competition.Thirdly, the paper discusses the present situation of the inter -governmental tax competition in China. After analyzing the environment, feature and manifestation, the result and reason of tax competition among governments in our country are thoroughly dissected. This part firstly analyses the cause of tax competition among governments and the effect of the key element fluidity limitations to tax competition in our country governments, then the paper mainly introduces seven kinds of tax competition among governments and simply analyses them, finally the paper points out six main problems along with tax competition and the main reasons for the existence of inter- governmental tax competition in our country.Fourthly, the paper puts forward choices of fiscal and tax policies to regulate tax competition among our country governments. The inter -governmental tax competition is a "double-edged sword", which can bring both sides at one stroke if we correctly guides and utilizes it, otherwise, we can only get nothing. The tax competition among our country governments is mostly malignant competition outside the system, such contributing factor is beyond the pure tax revenue territory, but it is related to the government functions, the public finance construction, the administrative system reform and so on. Hence, we must search the relevant countermoves to regulate the tax competition among our country governments with a broader angle, to remove the malignant tax competition and to create the necessary conditions to enhance competition. Clearly, how to intensify the administration of tax competition among governments and proposing the practicable policies have specified theoretical and practical value.Finally, the paper discusses the related system construction to regulate the tax competition among our country governments. The article mainly analyses the elements that affect the validity of tax competition among governments from the perspective of system, and discusses how to regulate the tax competition among governments from the following two perspectives: the tax coordination among governments, and the regulation of environment and finance and taxation.