Effects Of Tax Structure On Economic Growth-an Empirical Study Based On Provincial-level Panel Data In China

This article mainly examines the effect of tax structure on economic growth and its interregional differences. Firstly, we introduce the concept of tax structure and economic growth. In this paper, tax structure refers to the structure of effective tax rate on consumption, labor and capital income. Then we try to analyze the role of different tax rates in explaining the differences in stable growth rate and its transmission path in theory, using an endogenous economic growth model. After that, we estimate the effective tax rates and give a general statistical description.In the empirical analysis, we use the methods of regression analysis to test the effect of tax structure on economic growth by the Provincial-level panel data of China from2001to2012. Further, we add two dummy variables to the former model in order to study interregional differences.In theory, taxes have direct effects on family choices between work and leisure, between savings and consumption as well as the government productive expenditure proportion of tax revenue. Those factors will finally affect our economic growth. Statistical description shows that the level of overall tax burden of eastern region is the highest. The tax structure in western region is similar to that in middle region. In addition, our empirical research indicates that the tax structure has a significant influence on economic growth,and the effect also varies in different regions. Using national data, we get the result that the effective tax rate of capital income and consumption will affect economic negatively while the proportion of productive expenditure has positive effect. Labor income tax’s effect is not significant. And according to the regressions of western, eastern and middle region respectively, we find that in east all of the three tax rates have negative effects on its economic growth. In middle region, labor income tax has positive effect on regional economic development. Increasing the effective tax rate of capital income will have negative effects on economic growth in western region and the effects of consumption tax and labor income tax are not significant in statistics. The impact of public productive expenditure proportion on economic growth can be both positive and negative. After introducing dummy variables, the regression results show that the effects of effective tax rates on labor income,consumption in middle region and the influence of tax rate on labor income in western region are different significantly compared to those in eastern region.According to the conclusions, in order to achieve the sustainable development of our economic, we should control the total tax burden, continue to implement the structural tax cuts. In addition, we are supposed to take regional differences into consideration when we adjust taxation policies.