Taxation Effects And Optimization Analysis Of China’s Banking Industry Under Interest Rate Liberalization

The development of banking industry not only makes contribution to the growth of GDP and fiscal revenue, but also influences the whole countryman economy through the saving-investment mechanism as a crucial financing intermediary. Therefore, banking industry plays a key role in modern economy. The banks hold a more conspicuous position in China, because China’s enterprises rely on banks’ loan heavily. However, the development of China’s banks should not depend on the protection of interest rate control. The banking industry’s sustainable development can’t be separated from interest rate liberalization. So, imagine that interest rate liberalization is completed, what economic effects the current tax system of banking industry will produce? Whether the current tax system has a positive or negative effect on the banks? What experience other countries can provide for us in the field of banking industry’s tax system? How to optimize China’s tax system of the bank under interest rate liberalization? This paper tries to give answers to all this questions.Above all, this paper introduces the history and the current condition of the banking industry’s tax system in China in order to foreshadow the deeper discussion. Secondly, this paper analyzes the credit expansion effect and profit effect of banking industry’s tax system through building theoretical model of commercial banks’ profit maximization. Theoretical analysis shows that business tax has a negative effect on credit expansion while enterprise income tax doesn’t distort commercial banks’ credit behavior; Business tax and enterprise income tax have negative effect on commercial banks’ profit. Thirdly, this paper tries to adjust the financial data of 15 listed banks under the assumption that China’s interest rate is market orientated. Then, use the adjusted financial data to build panel data model to test the theoretical model mentioned above. The empirical results support the results of the theoretical model. Fourthly, the paper compares commercial banks’ tax system of different countries for the sake of providing experience for China’s tax reform. Finally, based on the theoretical analysis, empirical analysis and comparative analysis, some suggestions were put forward, including the general idea is reduce the tax burden of the banks and adjust the tax structure; As to the indirect tax, incorporate the business tax into the scope of the VAT tax; When it comes to the direct tax, introduce excess progressive tax rate system.