The Optimal Tax Burden Of Banking In China

Tax burden reflects the tax-sharing relationship between society and taxpayers in a certain period of time. It is directly related to the distribution pattern of social interests and is one of the most sensitive issues relating to people’s livelihood. The level of tax will not only affect fiscal revenues, but also affect the enthusiasm of enterprises’ development, which thereby affecting the economic development of the country:It will dampen initiative of enterprises although increase government revenues if taxes are too high; it will also reduce government revenues when taxes are too low. Both are not conducive to economic development and social stability.The development of modern banking, which is the needs of transforming economic development pattern and realizing adjustment of economic structure, plays a vital role not only in optimizing capital allocation, but also in regulating, reflecting and monitoring the economy. Our banking industry is facing fierce competition in the international market since joining WTO. Owing to the problems such as unreasonable integrant parts of tax system, improper tax structure and so on, modern banking is faced with high tax burden that seriously restricts the promotion of its competitiveness.This paper analyzes tax level of banking from the point of optimal taxation. Firstly, it explains the double relationship between tax burden and economic growth theoretically according to "Laffer Curve", and then infers and builds the optimal tax model by Cobb-Douglas production function on the basis of the existing researches, which is used to measuring optimal tax by using 16 listed companies’data of 2009-2014. The result of empirical estimation shows that the optimal tax level is approximately 13.33%, but the average tax level of the whole banking industry is more than 20%, which is not only far higher than the optimal tax, but is heavier in comparison with other industries. High tax burden will hinder the development of banking. Therefore, in the end of this paper, it takes use of listed companies’data of 2014 to calculate the applicable tax rate-7.56%, it is close to 6%, and then proposes several optimization measures according to this conclusions to provide some help for the coming "Business Tax Reform of VAT" in banking.