Research On Reform And Reconstruction Of Local Tax System In China

The reform on fiscal administration system of tax assignment in 1994 is of big significance in the whole fiscal history. Tax assignment system had thoroughly turned around the central government’s lack of financial resources and improved the “Two Proportions” as well as central ability of economic controlling. From this prospective, the system of tax assignment is productive. However, with the advance of the system of tax assignment, some potential problems have emerged. At that time, the central government had taken too much purse strings without establishing corresponding powers and responsibilities. The tax categories and tax distributions aren’t clear and rational, which leads to not only the mismatching between purse strings and powers, but also the unbalanced financial plight. To figure out the problem, local government had to seek other ways to collect money. Thus, implicit debt and the land finance “arise at the right moment”,causing great hidden danger and damage to China’s fiscal system. Meanwhile, replacing the business tax with a value-added tax has expanded nationwide. As the largest tax that local government depends on, business tax has already been gone. The local government should and must own the local tax system, which is also the key to dealing with the fiscal distribution between the central and local governments.Given the situation, it is necessary for us to reexamine the reform on local tax,summarize the advantages and disadvantages and then explore how to rebuild scientific and reasonable local tax system, as to promote the development of fiscal administrative system. This article has researched the current local tax system in China and come up with the problems and solutions. What’s more, the article also refers to relevant foreign countries’ experience of building local system, which helps to rebuild the local tax system in China.