Study Of Tax Preference Policy In China

After more than 20 years' market-oriented system reform, Chinese economic strength has been enhanced remarkably. The economic function of government has also transferred into the fields of public economy and macro controls. Meanwhile, national economy of our country stepped into a new development stage. In order to keep pace with the transition, we have to further optimize industrial structure, balance the growth of regional economy and carry out the strategy of persistent development. Besides, we will face the challenge from the rules of WTO, economy globalization and knowledge economy. With regard to the government, it is necessary to improve regulative function of macro controls as well as promoting the economic efficiency of public sector.Among the whole system of macro regulative measures, taxation is notable for its microcosmic, structural, encouraging and supporting features. So, it is an important instrument to economic regulation.Under the condition of certain tax rate and tax burden, tax preference means tax exemption or deduction to some special taxable objects, tax payers, areas or the impoverished people for their better development according to the social and economic objectives.The mechanism of tax preference plays an important role in many fields of "market failure", such as optimizing industrial structure, technological progress of enterprises, balancing development of different areas, encouraging venture investment, attracting foreign funds and supporting industries of progressively decreasing cost, etc. It can reflect the intention of macro controls directly and freely, then rectify the defects of market economy and improve efficiency. Therefore, preference is within the important principle of international fiscal policy. Most market-oriented countries, especially developed countries all put various tax preference into effect.Since the reform and opening to the outside world, Chinese government set up a system of tax preference which is consist of privilege to certain investment, industries, regions, technology and environment protection. This whole system covers turnover tax, income tax and poverty tax including profits holiday, deducting tax rate, tax exemptionftand deduction, tax rebate for reinvestment, accelerated depreciation, tax credit, deductible items, tax deferral and drawing special reverse fund. Further more, foreign tax preference for the purpose of fascinating foreign funds, technology and business management, is very helpful to accelerate social and economic development.The tax preference policy, however, must be adjusted along with national and international situations. As a result, the emphasis of preference will vary in the walk of time. China is now in the period of system reform, structure adjustment and growth pattern transition. Under the complicated circumstances, there are many problems with tax preference to be solved. For instance, the amount of forbidden and litigable subsidize is too large; directional function of preference policy is limited; the effect of tax preference on western and middle areas is not so well; tax preference to the local enterprises is unequal to that of foreign enterprises; the administration on tax preference is backward, and so on.According to the rules of WTO and macro regulation, it is necessary to readjust the structure and key point of tax preference system.In a word, we shall take some measures to deal with the questions mentioned above. Feasible suggestions are here: deleting the preference against rules of WTO and the promises, increasing privilege which is benefit for industrialization of new technology, assigning different emphasis in different areas, using tax preference to support foreign enterprises and the western and middle areas. In addition, improving the administration and tax system is also indispensable for make the situation better.