Improve The Discussion Of China's Preferential Tax System

Since opening up and reform of China, a lot of preferential tax laws applied to foreign capital and coastal regions have been enacted. The application of these laws played a positive role in foreign capital flow and coastal regions development, and generally promoted the process of market formation and modernization. But the government driven market is intrinsically against market economy and implies great risk due to government decision's violation of market law. Firstly, this method is sensibly influenced by government will in terms of market's resources allocation, so market mechanism is reduced; Secondly, there exists abuse of power, administrators take the preferential taxation as tool for rent-seeking particulars, minority interest groups. The intrinsic deficiency of driving market formation invokes a lot of negative effects in application of preferential taxation, excessive, informal preferential taxation becomes a major obstacle to durable stable, healthy, harmonious development of economy.Refinement of preferential tax law has become a requirement for the in depth development of economic reform. Our economic reform is to create socialist market economy. The fundamental quality of market economy is freedom, market economy demands market plays a basic role in resources allocation, all the market subjects can compete in an equal environment. Market economy is also a form of democratization and legalization. We constate a country's market formation is positively connected with democratization and legalization. We can reach the conclusion that market formation is on intrinsic coherence with democratization and legalization. This coherence demands restriction of power expansion, and civilian mastery of their destine.Concerned taxation, tax legalization and neutrality are the basic requirements of market formation. Excessive and informalpreferential taxation is not in line with principles of tax legalization and tax neutrality. So fundamental principle of the refinement of preferential tax laws is to reinforce the construction of preferential tax legalization and promote the neutrality. With accession of China to WTO in November 2001, our economy will be integrated into the wave of economy globalization and trade liberation. The rules of WTO pose concrete requirements to our taxation construction, the basic esprit of WTO is liberation, legalization of trade and investment. So WTO requires we intensify our construction in preferential taxation legalization and neutrality.This article consists of four parts:Part I : Introduction to preferential taxation and our country's preferential taxation system.Part II: Essence of the article, from the macro perspective, this part explores refinement of principles of preferential tax laws in China: principles of preferential tax legalization and neutrality.Part III: Advancement of concrete proposals for refinement of our country's preferential tax laws from micro perspective.Part IV: Advancement of concrete proposals for refinement of regional preferential tax laws from micro perspective.