Study On Central-local Allocation Of Taxing Power In Law And Economics

Today China is moving gradually from a homegrown county to a tax country. It growsnew demands on national governments. Taxing power is the logical starting point and corein tax law and tax studies. It is also a scarce resource. As an institutional arrangement, theallocation of taxing power impacts on the whole economics. In fact, in recent years, manyproblems in China’s economy can be found as the causes in allocation of taxing power.Strengthening the study of this issue has important theoretical and practical significance.In the existing studies, law experts and economists are clearly different. There israrely achievement combining the two academic fields. The allocation of taxing powerinvolves the fundamental power of the state, which has the complexity and particularity.Simply launching the research from the perspective of law or economics can not analyzethe issue clearly. In the current academic community, particularly in the field of economics,the study of taxing power is still rather weak. Using the research ideas and methods of lawand economics on discussing China’s central-local allocation of taxing power becomes anexploration in this thesis.The core issues we concerned in this thesis are whether China’s central-localallocation of taxing power meets the standards of efficiency and fairness and what are theinstitutional causes. Around these questions, this research mainly adopts the literatureinvestigation, equilibrium analysis, statistical analysis, historical and comparative analysisand game theory methods, etc. Based on the theory of tax debt relations, using the rationalchoice paradigm of law and economics, we analyze the behavior of the central and localgovernments and their motivation, examine their efficiency and fairness from differentangles. Then we research the causes of unfairness and efficiency losses from theinstitutional supply and demand in practice. Based on this, we point out the optimized pathon China’s taxing power allocation.The core idea in this thesis is the fundamental problem in China’s current taxingpower allocation is administrative decentralization. The allocation under the role of lawdisposes the fair at the beginning, minimizes total cost and also is the most efficient. Tooptimize China’s allocation of taxing power, we should follow the route of law. In thisthesis, the innovation points include:(1) The innovative research perspective. In this thesis, we adopt the theory of tax debt relations as the logical starting point of the research. Efficiency and fairness are used asstandards of taxing power allocation. By analyzing the behavior of the central and localgovernments, we investigate China’s tax decentralization dynamically and discuss thecause of the existing tax decentralization mode. We try to break through the path oftraditional law or economics on central-local allocation of taxing power field.(2) The view of fairness and efficiency in taxing power allocation. In this thesis, basedon using efficiency and fairness indexes respectively to the central-local allocation oftaxing power, we further explore current China’s tax decentralization and find thefundamental cause of the problems is the unfairness at the starting point of institutionalarrangements. Namely, it is also called the administrative configuration mode of taxingpower. The role of law just corrects the deficiencies of administrative decentralizationmode. The fairness of starting point will not only help to achieve fair result, but also beconducive to the long-term efficiency.(3) Combining the horizontal and vertical allocation. The two dimensions of taxingpower allocation do not exist isolately. In exploring the allocation between central andlocal governments, we should combine it with the horizontal configuration. We considerthat the cause of the imbalance in vertical allocation dues to the out of control in horizontal.Therefore, while the vertical decentralization impacts the economy more significantly, thefinal solution of the problem should be attributed to the horizontal allocation. It also makesthe proposed path of role of law more persuasive.(4) Analysing the impact of changes in China’s ownership structure on taxing power.Under the market-economy environment, the rapid development of the private economymakes tax revenue from the private sector in national finance income more and moreimportant, which greatly enhanced the requirements of justification and legitimacy abouttaxing power. However, China’s authority configuration mode still followed the old pathand did not adjust and get rid of the dependence on the path of rule of man. It failed toadapt to the requirement of the current economic development well, which leads to manyproblems in the practice.(5) Constructing a tax decentralization index under China’s reality. It is named asself-sufficiency rate of local tax revenue. The empirical results show that in recent years,China’s tax decentralization was not conducive to economic growth.