On Preferential Tax Policy And Its Optimization Of China

Preferential tax policy is the main content of tax system elements. To consolidate tax's macro-control economic function is the central problem of preferential tax policy. From this perspective, the essence of optimizing preferential tax policy is to solve the problem of the macro-guidance of preferential tax policy and that of micro-foundation conforming to market mechanism. However, whether governmental policies and objectives can be realized not only depends on the strategic choice in government's tax design but also on taxpayer's strategic behavior choice. Government's interests shall not be considered exclusively, taxpayer's interests and strategic behavior choice shall also be considered thoroughly. Preferential tax policy shall enable taxpayer, in the process of paying tax, to make his behavior choice caused by the motivation of pursuing maximum profits conforming to government's interests. Thereby, this paper begins with the analysis of definition and nature of preferential tax policy, roughly comments on the current situations of preferential tax policy in our country. On this basis, it learns from some common international practice and proposes the thinking choice to entirely optimize preferential tax policy in our country. There are four parts in this paper. The first part concentrates on the elaboration of the definition and nature of preferential tax policy, including three aspects. The first aspect is the definition of preferential tax policy. Preferential tax policy refers to measures that a country adopt in market competition and control for certain special form of transaction of certain special industry in certain region and encouraging and preferential measures (including supporting, appealing and subsidizing, preferential, special-case, temporary measures etc.) that the government, in relatively reasonable ways, refunds or gives up part of tax to special economic subject (investor) in order of priority in order to achieve macro-economic developing objectives in a certain historic period. The second aspect is the content of preferential tax policy. According to economic developing objectives, preferential tax policy is classified into regional (such as special economic region, Pudong new region, middle and western region and impoverished region etc.), industrial (high-tech industry, environmental protection, energy, welfare industry etc.) preferential taxes; according to ways of preferential taxes, it can be classified into direct preferential and indirect preferential. Direct preferential includes tax reduction, tax exemption, preferential tax rates, postponed taxpaying, tax sparing and so on; indirect preferential includes: tax credit, accelerated deprecation, tax deduction and so on. The third aspect is the nature of preferential tax, which refers to financial measures that the government "transfer"part or the entire amount of tax that taxpayer shall pay to taxpayer by tax collection. It is a kind of financial payment. The nature of preferential tax policy changes three kinds of taxpaying relations: first, preferential tax leads to the increase or reduction of property of government and enterprises. Second, while some certain groups of taxpayers enjoy preferential tax policy, others may have losses. Third, preferential tax gives economic aid to the beneficiary, whose competitive power improves when its funding capacity, management level, technical capability and qualifications of employees are not higher than ordinary enterprises. The second part elaborates the current situations of preferential tax policy and basic reason for the existing problems. The first aspect begins with industrial, regional and foreign preferential tax policy and preferential policy for fundamental industry and reviews the basic conditions and problems of preferential tax policy one by one in our country. The third aspect is the conformity analysis of reasons for above situations. There are four reasons: first, legal system of preferential tax, provisions and clauses of preferential policy come from various sources, lack of unity and standardization and therefore weaken the seriousness of regulating tax according to law. Second, there are too many layers of preferential taxes policy and it is enacted too fast, lack of systematic demonstration. Third, targets of preferential taxes are too many, so the efficiency is low and the administration of preferential taxes may become random. Fourth, the original effects of preferential taxes make the policy makers and practitioners overestimate its functions. The third part summarizes international convention of preferential taxes through listing advanced experiences of developing and developed countries in preferential tax policy. The first is preferential government criteria. Government makes an annual appropriate adjustment to preferential tax policy by tax payment administration methods according to needs of economic development and industrial policy. Besides,it evaluates the effects of every preferential tax and cancels those which have no effects and do not accomplish goals, strengthening the control of effects and payment scales of preferential taxes in system. Economic powers are good at using tax payment and regulating preferential taxes. The second is the preferential policy guidance. Every country has their definite strategic goal in their preferential taxes. The third is preferential importance. Both developed countries and developing countries consider company income tax as an important tax category of preferential tax. Meanwhile, they consider foreign investment, special economic region, high and new technology, export trade, industrial skills etc. as the highlight of preferential tax. The fourth part proposes some suggestions for optimizing preferential tax policy. First, optimize legislation in preferential tax legal system, change ways of issuing preferential tax policy in form of various regulations, ordinances, notice and so on in past and formulate standardized preferential tax policy. Strengthen construction of preferential tax material law and preferential tax procedures while concentrating on industrial policies, technical development and encouraging investment. Second, further explicate system of tax distribution in tax system of preferential taxes, establish unified system of income tax of domestic and foreign companies, clear up and abolish ongoing income tax reduction policy of domestic and foreign companies, consolidate tax's function of guidance on investment direction according to new preferential tax policy formulated by requirements of industrial policies. Third, certain domestic company's preferential tax belongs to the property of appealing, subsidizing and preferential in transitional period and foreign can not enjoy it. This is not in accordance with international convention of taxation indiscriminate treatment and WTO's principles concerning subject treatment, and is not helpful for stimulating social resource optimal disposition and for international economic and technical competition and cooperation, so it should be abolished. Fourth, in ways of preferential taxes, change the priority to direct preferential to priority to indirect preferential and change producing added-value tax to consuming added-value tax. Fifth, as for the targets of preferential taxes, further arrange and regulate preferential tax policy, give priority to industry, re-formulate preferential tax policy with emphasis on industry. First, support agriculture and consolidate the foundation of national economy; second, support the development of bottleneck industries like...