Competition Of Local Government Tax Shanghai District

Tax competition between local governments has a great impact on local economies. Since China carried out tax sharing reform since1994, the fact that local governments are stakeholders becomes increasingly obvious. Along with the rapid development of China’s national economy, local governments offer various tax preferences to attract foreign economic resources and capitals, develop local economy, and increase local financial revenues. As such, it is important to clarify related concepts and understand the tax competition between local governments, which is significant for regulating the tax competition between local governments and accelerating healthy tax competition, thereby promoting regional social and economic development in China.In recent years, China’s economic structure is being strategically adjusted. Shanghai municipal government pioneers in the economic structure adjustment. In order to adjust local industrial structures and develop characteristic industries, Shanghai district governments offers various competitive tax preferences to attract enterprises of pillar industries, which greatly promotes local economies and industry upgrades.This paper combines the theoretical and empirical analysis of tax competition between local governments. The theory of public choice is used as the theoretical basis for analyzing the background, motivating factors, and effects of tax competition between local governments. The theory of public finance is used to facilitate empirical analysis of the tax competition between Shanghai district governments. The tax competition between Shanghai district governments during the transitional period serves as a model in healthy tax competition for local governments in other provinces.