Research On Distribution Of Inter-provincial Turnover Tax Transfer

In theory, the sources of tax revenue are base on the economic activity, and local tax revenue are generally used directly for regional economic development and public goods service. Indirect tax are the main part of our tax structure, and the Value-added tax(VAT) and business tax(BT) are the main source of local government revenue.Turnover tax is borne by the final consumer, its levy nature in circulation causes inter-provincial tax transfer which is inconsistency of tax revenue attribution and tax ownership. Consumption is an important driving force of economic growth,and the revenue transfer of turnover tax seriously distorts the mode of action of this power, so that tax revenues would have been part of the land of consumption into production.This paper calculates on transfer sizes of VAT and BT of 31 provinces in China from 2007 to 2012 and explores the distribution characteristics and factor decomposition. The results show that, currently, tax contributions of final consumers to their locations are severely neglected with the turnover tax system. The transfer size of turnover tax is huge and increasing. Specifically, transfer direction of VAT is closely related with value added processes of VAT. Eastern region gets turnover tax revenue which should belong to consumption places, and inter-regional consumption reduces tax revenue which should belong to VAT in consumption places. BT transfers from other regions to eastern region. VAT and BT are lost more in regions with higher proportion of the country’s total population.Based on the conclusions above,and given by the primary stage of socialism characteristic conditions in China, we think the arrangement that turnover tax system imposed by central government then allot it to the local government under the scale of population and consumption is a better idea.