Research On Regulating China's Local Government Tax Competition By Law

The Tax-Competition among some local governments of China goes beyond the wholesome scope, breaks the tax law and regulations, and become a type of harmful tax-competition, which restrains the positive effect of tax-competition, and causes tremendous losses to the revenue of China.In context of decentralization system, the autonomous decision-making power of local government is enhanced, it's possible that the tax-competition among local governments because of the decentralization of financial power, and local gover- nments can carry on tax-competition in an administrative manner, in a disguised form. Firstly, the incomplete system of tax distribution arises the tax-competition among local governments, confusion of jurisdiction of taxation, unlawful tax exemption by local governments and abnormal tax-competition among local governments, at the same time, unfair preferential tax policies intensifies tax-competition among local governments. Secondly, the assessing mechanism on officer is the subjective reason of tax-competition among local governments. Thirdly, the imperfect mechanisms of supervision and administration connive tax-competition among local governments.Tax-competition is a rapier, which erodes tax base, causes public products in short supply, injuries the benefit of taxpayers, breaks the principal of neutral tax and lowers the efficiency of allocation of resource in one hand. In the other hand, it has the function to promote prosperity and growth of local economy and free flowing of essential productive factors, to relieve tax burden of taxpayers, to promote harmo- nized growth of local economy,and to promote governments to increase the supply of public products.It's not sufficient to eliminate local protectionism and abnormal tax-competition just by the means of administrative measures and centralization of legislative power relate to taxation. Moreover, it's indispensable to regulate tax-competition by legal means, endow local governments legislative power of taxation, insofar as to identify harmful tax-competition effectively, and to define decentralizaton of fiscal clearly, which are the basis of legalization of tax preferential policis, meanwhile, it's indispensable to build up perfect system of fiscal transfer payment, and to found a organ to coordinate the relationship among different subject,and to enhance the exchange of information.