A Study On The Taxing Power Division In China From The Perspective Of Local Tax

According to the Decision of the CCCPC on Some Major Issues Concerning Comprehensively Deepening the Reform, "Finance is the foundation and an important pillar of state governance". The tax distribution system reform initiated in 1994 has shaped the basic framework of the current fiscal and taxation systems, and has contributed significantly to the increase of the government's financial strength and to the rapid growth of the Chinese economy. However, as the situation changes,the current fiscal and taxation systems cannot effectively respond to the requirements of the development of the economy and society, and have constrained our social economic growth. The improvement of local tax system is an important part of the fiscal and taxation system reform. While taxing power is the core of local tax, the nature of improving local tax system is to improve the division of taxing power. The taxing power can be divided into three aspects, tax legislative power, the power over tax collection and management, and the power to benefit.Different combination of local taxing power will lead to different types of local tax.Under the guidance of the spirit from the 18 plenary session, this paper studied how to divide taxing power in China from the perspective of local tax. First, started with the main concepts of taxing power and local tax, this paper studied the rationality of taxing power division based on the theory of public goods and fiscal federalism. Second, the paper traced the historical evolution of taxing power division practice in our country, from which it drawed a lesson, and then settled in the current practice, discussed its characteristics and main issues. Third, through international comparison of taxing power division, it gained some enlightenment from the international experience. At last, the paper argued that appropriate taxing power should be given to the local governments in China.Four policy implications are brought forward. First, the power to benefit from tax should match the responsibility of expenditure, and it's a precondition to clearify the distribution of the authority of office and responsibility of expenditure between central and local governments. Second, the power over tax collection and management should be clearifies based on the category of taxes. Third, appropriate local tax legislative power should be delegated to local governments to improve their competence of local governance. In detail, the power over tax bases should be concentrated to central government, while the attempt of giving local government certain power over the imposition of new local tax and over certain local tax rate should be encouraged. Fourth, the legalization of taxing power division should be advanced timely.