Resaerch On Intergovernmental Tax Competition Mechanisim And Effects

For a long time, the existence of government competition is indisputable fact. To provide optimal public goods effectively will be tough for a unitary government under information constrains. According to the principle-agent theory, sub-government will get private informations and broad administrative discretion under the circumstances of asymmetric information and competition.Then sub-government is bound to compete with each other to maximum jurisdiction profitability. So as long as there are multi-level governments under Decentralized country, ther would be copetitions between intergovernments, and this competition has nothing to do with form of government.Intergovernmental tax competition as the main form of intergovernmental competition mainly refers to the competition about taxation. Intergovernmental tax competition was originally developed with the theory of fiscal federal ism, For any free-market cuntry, whether it’s federal state or unitary state, the fiscal system is federalism. Befor china’s reform and opening up, china implemented Unified collection and Allocation of Funds by the state, local government as the executing agency of the government at a higher level has neither power nor ability to develop local economy. Under this situation, there was no tax competition between local governments.After reform and opening up, especially the foundation of fiscal decentralization system and tax sharing system empowered local government with the right of residue claim. Local government enjoyed greater freedom in the financial revenue and expenditure, gradually formed independent economic interests and have certain financial autonomy and allocation of resources. The right of economic resource possession and control of power not only boosted regional development but also improved their political influence. Political decentralization and fiscal incentives to local finance growed the fiscal benefit of local government, and the performance appraisal system which based on GDP deepening the competition. Local government,in order to enchance the economic capacity and regional welfare,aiming at increase regional tax revenue or using taxation as an tool will launch the intergovernmental tax competition for the purperse of obtaining more taxation resource or economic resource.Long term since, local governments has the center stage in tax competition. They not only compete with the central government, there is more to compete with government at the same level. The form of tax competition between local governments in china is mostly invisible for the local government does not have the right to design taxes categories and the rate of taxation. In reality, the local government in order to attract foreign investment, broadening the tax base and increase financial income has also taken various forms of outside-the-system tax competition and preferential tax policies such as local government tax rebates. material rewards to top taxpayers, decrease land leasing price, infrastructure construction,finacing and loan guerentee for enterprises. Moreover, some areas even expand the scope of tax deductions without authorization, formulate the preferential tax policies on its own and relax tax collection and management. So much so that some local government acquiescence in tax evasion to enhance the tax competitiveness to attract more economic resources. With a much wider variety methods of tax competition, the competitive landscope has expanded to capital, labor, technology and any other mobile factors. Tax competiotn tool intergrated with method, system-in anti out using simultaneously become the main trend of intergovernmental tax competition.Obviously, Tax competiton leads to serious tax drain and tax disorder tax competition has also led to the imbalance development of economy and society among regions. Meanwhile, higher transaction cost and industial homegenity, tax distortions, economic discrimination, resource waste,ecological environment destruction and so on intergovernmental tax competition in china result in vicious competition,thiny resource spreading,making it to be impossible to integrating regional resource to optimize the resource allocation levels.Tax competition has not just created economic issues,but also social problems. It enough to arouse our attention to tax competition.especially china,as a typical developing countries undergoing the economic transition,research on tax competion especially the intergovernmental tax competition in china is particularly important under the current social economic system. On the Basis of available research results and practical experience, this paper combining the regional development characters researched the current situation and competition mechanism of intergovernmental tax competition in china, and then investigated the tax competiton effects from diferent perspective. It is of great significance to standardize intergovernmental tax competition and form’better tax competition environment.According to above analysis, main work and study of this artical are as follows:First of all, this paper described the objective condition of intergovernmental tax competition of china from two aspects of objective data and practical experience. Based on empirical data, Competition level measurement and spatial correlation test were made to exam the existence of intergovernmental tax competiotion in china,which provide the direct evidence that intergovernmental tax competiotion does exist in china. After proving the existence, ways of competition adopt by local governments were explicitly analyzed and summarized, including tax incentives financial subsidies and returns, and other forms of competition, such as decrease land leasing revenue,cost rduction,telax tax collection and administration.Secondly, this paper explored the mechanisim of intergovernmental tax competition through analyzing the reason of formulation and testing competition stratey between local governmets. The first step is to reveal the reason and realistic background of intergovernmental tax competition’s exictence in china. The second step is to explore the path of tax competition through examine the behavior strategy of local government by buiding spatial economitrics model.Thirdly, this paper analyed the effects of intergovernmental tax competition both from buiding theoretical model and making empirical test. This part includes the effects of intergovernmental tax competition with factor interregional mobility, effects of economy development and the effects of environment pollution. Through the whole analysis, we can make comprehensive view of intergovernmental tax competition effects of china with full recognizition.Finanly,on the basis of research results above,we try to find the core of problems and present some usefull solution to it,in order to eliminate these negative effects caused by unordered intergovernmental tax competition and provide reference for the establish of effective goal and path selection of intergovernmental tax competition of china.The article tried to do some innovation:Fiestly,the article examed the existence of intergovernmental tax competition in china using two kinds of statistcal methods,that’s standards test and spatial correlation tset. Despite many studies about this question, but most simplely use macr tax burden or the gap between macro tax burden and their difference. It’s unscientific to present the degree of tax competition between local governments for macro tax rate is affected by various factors in reality. This article examed the existence of intergovernmental tax competition in china through standards test and spatial correlation tset and explored the competition strategy of local government by binding spatial economitrics models,all of these are more precious and scientific to exam the effect of tax rate of neighbor ares to local state.Secondly, this artical adopted spatical ecnomitical model analised the correlation problems generated by intergovernmental tax competition using empirical date. Based on spatical panel data model, this article examed the stretagy of intergovernmental tax competition, the effect of intereginal factor mobility, the effect of economy development and the effect of environmental pollution This kind of research method both considered the effects of time trend and special factor is more scientific and reasonable to measure the strategy and effects of intergovernmental tax competition. Besides, this article filled up domestic empirical research in this filed.Thirdly, this article reasreched the economy development effects and environmental effect of intergovernmental tax competition based on the perspective of growth and development. Investigating the effects of tax competiton to social economic activities from these two dimensions are more helpful to exam the effects of intergovernmental tax competition when facing with sustainable growth and development.It’s of great significance to regulate the behavior of local governments, balance the relationship between economic growth and environmental pollution, and guide the tax competition behavior of local goveroment more scientificly and orderly.