Proposals On Adjusting China's Taxation Preferential Policies Under The Agreement On Subsidies And Countervailing Measures

Subsidies are closely related with the taxation policies and all the taxation preferential policies are the important forms of the government subsidies. The ASCM (Agreement on Subsidies and Countervailing Measures) disciplines the use of the taxation preferential policies of the member countries. This paper, based on measuring China's taxation preferential policies by the requirements of the above agreement, has analyzed the problems prevailing in the current policies. The major problems exist as follows: First, there are too many prohibited subsidies called "Red Lantern Subsidies". The exclusive characteristics of the taxation preferential policies are evident. The requirements of enjoying the export subsidy and import substitution subsidy are too direct. Second, there are excessive actionable subsidies called "Yellow Lantern Subsidies". The local governments abuse the taxation preferential policies. Meanwhile the competition of domestic local taxation is becoming serious. Third, there is the shortage of non-actionable subsidies called "Green Lantern Subsidies". It is the fact that the shortage of the subsidies on Research and Development, the Development of the Poverty Areas, Environmental Protection and other areas encouraged and proposed by the agreement is serious. Last but not the least, the form of taxation preferential policies is lack of flexibility. The policies are practiced in the major form of direct preferential ways instead of the indirect preferential ways.Based on the above discussion, with the development of the new round taxation system reform in China, this paper has put forward proposals on adjusting China's taxation preferential policies under the ASCM. First, the taxation preferential policies should be conducive to the development of the small and medium enterprises. Second, the policies should contribute to the development of the science and technology and new industry. Third, the policies should be beneficial to the comprehensive use of the resources and environmental protection. Fourth, the policies should promote the balance of the development of the various areas. Last but not the least, Laws on Taxation Preferential Policies should be enacted to regulate the practice of the local taxation preferential policies.