The Research On Law Problem Of Enterprise Fiscal Subsidy

Fiscal subsidy is a metastatic fiscal expenditure, a means of regulating theeconomy by way of redistribution of government financial resources. The governmentgrants subsidies to businesses and households to achieve certain fiscal policy goals. Inrecent years, with the increasing maturity of economic and social development, aswell as the awareness of the market economy, government fiscal subsidies start toattract more and more attention. The purpose of government fiscal subsidies to firmshas two folds. One is to overcome market fallacy and market failure, and to cover thelosses arising from the execution of government policy goals. The other is to suggestthe public resources to support certain sectors of priority, and to promote thedevelopment of those industries. However, in the recent consecutive years, much ofthe fiscal subsidy goes to the most profitable state-owned enterprises such as PetroChina and Sinopec, and some inefficient firms on the verge of bankruptcy due to poorperformance turned around the corner after receiving such subsidies. Fiscal subsidy isa obligation free support from the government. As a result, other firms reside in a lessfavorable position as opposed to those that obtain such subsidies. The misallocation offiscal subsidy is both due to the defects of the fiscal subsidy system, and thedislocation of government functions. Fiscal subsidy utilizes the public resources fromthe tax revenue, which in principle should serve the welfare of the taxpayers and thepublic. The inefficiency of fiscal subsidy adds financial burden to the government,affect the efficacy of fiscal spending. Not only does it lead to subsidized firms’over-reliance on government support, but also reduce their incentive to innovate andto increase productivity, which disrupts the market mechanism of rewarding the fittest.In accordance with the requirements of the market economy, this paper suggests thatour country needs to reform the fiscal subsidy system to abide the rule of the market,standardize the implementation process and to promote a healthy economy.