Wto And Tax Reform

In today' world, no nation exists in economic isolation. As a big country, if we cannot be mixed up in the international economy, we will lag behind. So we need to join the world economy. World Trade Organization (WTO) is an international economic organization, and we have spent several years trying to join it. Now, success is around the corner. However we have to be confronted with a paradox. We should protect and promote domestic industries, which are important for our economic development, but cannot compete with the international company at present. On the other hand, we ought to standardize our tax system based on the rules of WTO. Tax is a tool of management and control by government. How to use it to solve the problem above is the subject of the thesis.The article is divided into four parts. Chapter 1 sets to the explanation of the rules relating to tax in WTO. The first rule is about reduction of tariff restrictions and non-tariff trade barriers. The second is non-discrimination rule, and the following is rule of equity, indemnity rule, rule of normative and open policy. According to these rules, it is necessary to innovate and normalize the current tax system. But every rule has an exception, that is, the objective of the rules in WTO is not restriction but promotion. Rational protective measure is allowed. So we can take advantage of this exception to reform tax system to protect the domestic industries.Chapter 2 involves analysis of the shortage in current taxation according to the rules of WTO and the theories of tax, which includes three parts. Part one analyzes the taxation of goods and puts stress on tariff and added value tax (VAT). The defectiveness of tariff is huge gap between nominal tax rate and actual tax rate, which leads to low effective rate of protection. Adopting productive-type VAT had restricted investment. Because its levying object contains investment in fixed asset, and if the tax for purchasing the fixed asset were not deducted, the investor has to pay extra expense----investment tax, thus their confidence of investment will be frustrated severely. Present VAT also influences export tax rebate. The former investment tax partly transfers to the production cost of export goods and pushes the price up, which weaken the competitiveness of our domestic goods in international market. In addition, these taxes of goods violate rules of WTO universally. Part two introduces the business income tax and individual income tax. There are two kinds of business income tax in our country, one is for domestic capital enterprise, and the other is for foreign-invested corporation. The latter often benefits by many preferential policies such as 'two years of tax free and three years of half tax', etc. In the expense deduction, they have fewer restrictions than those of domestic companies. All above result in the different tax burden and cause the unfair game. The disunity of tax system in corporate tax not only violates the nondiscrimination rule, but also hinders the development of domestic industries. In addition, due to the irrationality of the tax policy, the function of current individual income tax is very weak and disadvantageous to the realization to the goal of adjusting equity of income. The rest current taxes also have many shortages: species diversity contrast to low budget income, out-date standards, amending frequently, differentiating policy based on the source of capital, charging barbarously and so on. All these defaults influence the development of economy and don't correspond with the nondiscrimination rule. Based on the rules of WTO and analysis of the current tax system, Chapter 3 puts forward the following basic principles:(1) warrant of budget income;(2) rule of equity; (3) reasonable protection of domestic puerile industries;(4) unity and publicity of the policy. Taking all influencing factors into account, writer concluded a scheme for the reformation of the tax system: unifying the act of tax, normalizing the policy of tax, equalizing the tax burden, prote...