Research On The Correlation, Positive & Countermeasures Of Local Taxation And Economic Development

Taxation is a necessary government activity during marketing economy, and it's the main source of government fiscal income. The increase of tax revenue depends on economic development, what's more, in one hand the economic development decides tax revenue, on the other hand tax revenue counteract on economic development that it regulates economic development. Early in 20century 60 years, economists started to pay attention to the relationship between tax revenue and economic development, American economist Athur Laffer put forward the Laffer Curve Theory which is the core of Supply School Theories, and Laffer Curve Theory point out that tax rate not only affects tax revenue, but also affects output and economic development. And tax rate must be moderate, that is to pursue a best tax rate point which can gain more tax revenue but not hinder economic development. To gain the same tax revenue there are two tax rate (high tax rate and low tax rate ) to be altered, if high tax rate altered it will discourage taxpayers, and do harm to economic increase. So we should choose low tax rate to promote economic increase. And then economic group began study the relationship between tax revenue and economic development widely. The professor of World Bank, Keith Marsden compared the economic development among high tax rate countries and low tax rate countries, and come to the conclusion that the change of tax rate will affect economic development directly, that was say that economic development is positively related to tax burden.Since 1994 , china has been practicing new tax system, two tax systems - central and local tax system establish step by step, and divide the category taxes to three taxes: central tax, local tax and central—local shared tax. Local tax revenue relate to local economic development more closely, local government can carry out a lot of tax policies or tax measurements to promote local economic development, on the same time increase fiscal income. This paper studies local tax revenue and economic development in Ji Yuan city. Based on general theories of economic development, this paper emphasises on examining Ji Yuan city's local economic development condition and local tax revenue development condition, and analyzes the relationship between tax revenue and GDP& industry structure , concludes that tax revenue and economic development promote mutually. At last, we put forward some tax policy suggestions to further Ji Yuan city's economic development.