Tax Administration And Tax Collection System: Institutional Design And Economic Performance

Tax administration and tax collection system is critical for the economic performance of a state. A good tax administration and tax collection system will increase the efficiency of the economic performance of a state. This essay tries to identify issues in current practice of tax administration and tax collection system in P.R.C, and gives some constructive suggestions for the improvement of the system by applying an economic analysis method on five key sub-systems of tax administration and tax collection system. These five key sub-systems are: tax payments service, tax source monitoring, tax payable computing, tax collection, and tax inspection.Part 1. Tax payment service. A fundamental purpose for tax payment service system is to reduce the overall social cost, which consists of tax payment cost and tax collection cost. Tax payment cost is the external cost for tax collectors, who are the key formulators of tax payment service system, so that tax collectors have no incentive to build up an efficient tax payment system. For the purpose of reducing social cost and solving external cost problem, a new system to internalize tax payment cost for tax collectors is needed.Part 2. Tax source monitoring. Tax source monitoring system is the essential system to solve asymmetry information between tax collectors and taxpayers. There are basically two stimulus mechanisms for tax source monitoring: moral stimulus and price stimulus. As a creative mechanism in recent years, price stimulus affects economic performance and lead to unexpected consequence. Tax administrators shall formulate price stimulus mechanism from the perspective of economic performance so as to increase the efficiency of tax source monitoring.Part 3. Tax payable computing. Due to the inefficiency of tax source monitoring and cost of evidence proof, tax collectors have to use different computing measures to compute tax payable, namely statutory measure and assessing measure. Assessing measure is subject in certain extent to the discretion of tax collectors, which brings to some uncertainty and influences the health of economic performance. It is necessary to build up an administrative model to enhance the certainty of tax payable computing system and establish a healthy economic order.Part 4. Tax collection. Activities of economic entities may incur some risk to the realization of fiscal revenue of a state. Tax collectors usually collect tax before due...