Research On The Local Governments' Tax Competition In China

Local governments always focus on the competition of high quality economic resources and tax resources.Due to the dual influence of fiscal decentralization system and officers' promotion system,tax competition has become an important method of competition among local governments.At the same time,with the increasing of the degree of opening in market and the regional correlation,the deepening of the production factors and reorganization,the tax resources competition of local governments are also exacerbated.Tax competition was analyzed from economic effects.On the one hand,orderly competition can accelerate the flow of factors,improve the efficiency of the government;on the other hand,excessive competition may lead to neutral tax distortions.It even erode the tax base and make tax system complicated.On this basis,this article researches the tax competition of local governments in china.Due to the mobility of production factors,the implementation of tax policy is often affected by the geographical factors.This paper deals with the spatial panel data of 31 provinces in China from the perspective of spatial econometrics in 2006-2015.Empirical analysis results show that our local governments exist in tax competition,the main strategy is imitation in 2014.At the same time,tax competition has a significant role in promoting economic growth,that is,the higher degree of tax competition efforts and the lower effective tax rate,result in the faster the economic growth of local governments.In addition,from the summarize of preferential tax policies in the East,central and western regions of China,it is found that the imbalance of regional development is not only related to the economic and geographical conditions,but also to the preferential tax policies.Therefore,this paper puts forward constructive reasonable suggestions from multiple dimensions among local governments in china.Basically,we need to solve the main question of tax competition and avoid the harmful tax competition.Specifically,firstly we must deepen the reform of the tax distribution system,strengthen the construction of the local tax system and division the powers and financial rights;secondly we need to regulate the tax competition in order to guide the benign development of tax competition effectively;thirdly we need to improve performance appraisal system of the local government,in order to balance the relationship between government and market;fourthly we need to establish cooperation mechanism of local government tax,to narrowing the economic gap in regions gradually.