Study On The Choice Of Main Local Taxes In China

The reform of tax-sharing system in1994had primarily established our local tax system, and promoted local economic development to a certain extend. But the tax-sharing system reform was conducted under the purpose of retaining vested interests, which considered more strengthening centralization of authority, so there are still many problems that need to be solved in the tax-sharing system.In respect of tax power division, the legislative authority is highly centralized in the central government. On the tax categories division, to guarantee the central government revenues, the biggest part of the tax categories have been divided into central tax and shared tax, while the rest of the tax categories have been left to the local government.As matters stand, business tax continues to be the most important income source for local tax system. Although business tax shares duty for central and local governments, but central government takes the lower proportion, business tax is indeed the main body of local tax system. With the advance of the reform program of replacing the business tax with a value-added tax, the dominant position of business tax has begun to erode, that will reduce the local governmental financial resources and make the operation more difficult. Against this background, it’s urgent to perfect local tax system. During the process, selecting a main tax category is the core, and also the primary issue that should be considered. Hence, we should make an in-depth and scientific study on the choice of the main category of local tax, so that we can properly select and cultivate the main category of local tax system.The choice of the main category of local tax is a complicated problem, which needs to comprehensively consider various factors. As there is no fixed or unified model in the case of selecting main category of local tax and experiences of other countries can only serve as partial references, during the study of this issue, we should combine theory with practice, and design specific plan based on China’s reality.In this paper, the author mainly use literature review method, experiential summary method, quantitative analysis method and qualitative analysis method to design a plan of selecting main category of local tax on the basis of deep analysis and summarization. This paper mainly consists of five parts:the first chapter introduces the research background, research significance and major research methods. The second chapter is to elaborate the principal theory of the main category of local tax system. In this section, the local tax and local tax system is defined and the connotation and influencing factors of main category of local tax are expounded. In the third chapter the impacst of the reform program of replacing the business tax with a value-added tax are analyzed. This chapter introduces thecurrent operation situation of our country’s local tax system before the reform program. By studying the tax structure collection authority, it is found that business tax is indeed the main body of local tax system. But the reform program of replacing the business tax with a value-added tax will change the dominant position of business tax.That will make local governments underfinanced, and as a result, they will excessively rely on the central transfer payments, off-budget revenue and land sales revenue. Against this background, it’s urgent to perfect local tax system and choose a new main category. The forth chapter lists the choice of the main category of local tax in centralized countries, decentralized countries as well as hybrid countries. Some lessons are drawn and experiences are summarized from other country’s practice. In the last chapter, based on the analysis and summary above, we come to our conclusion as follows:Before selecting the main tax category, we must simplify the structure of the government, classify the administrative power of the governments of different levels, and then give local government certain tax legislative power. Meanwhile, due to the limitation of our country’s economic development level and financial management system, the main tax category’s establishment can’t be accomplished in an action. It should be combined with China’s reality and respectively setspecificgoals. Based on the differences of natural endowments and economic development in different regions, we take property tax as the main category of local tax system in the east and central China; and resource tax should be built as the main category of local tax system in the west China. To ensure that the local tax revenue won’t be decreased by the reform program of replacing business tax with the value-added tax, we should properly reform these two tax categoris, The main innovation points of this paper lie in:First, there’s innovation in the study angle. The text is based on the background of the reform program of replacing business tax with the value-added tax, giving suggestions from different angles. Second, the study methods are innovative.In order to analyze conveniently, besides the qualitative analysis method, this text also adopts the quantitative analysis method.