Tax Decentralization,Local Government Competition And Regional Development Level

Since the reform of the tax-sharing system in 1994,local governments have certain financial powers,which has created incentives for local officials to make China's tax revenues show a rapid growth trend of up to 10 years.However,the tax-sharing system also brings about the mismatch between the financial power and the power of the central government and the local government.The central government's tax revenue at the same level is increasing,and the local government's tax revenue at the same level is becoming smaller and smaller,but the expenditure responsibility moving down the hierarchy,mainly concentrated on local governments.In addition,with the implementation of the tax-sharing system,the central government has formed an assessment mechanism for local governments to simply target the GDP growth rate.Local governments will inevitably compete for favorable labor,capital,technology and other resources for their own promotion,this formed a local government competition.However,as a representative of the interests of the residents of the jurisdiction,the simple pursuit of GDP growth does not mean that the residents of the jurisdiction can benefit.The residents in the jurisdiction are more concerned about the improvement of the comprehensive level of the region.Then,the formation of local government competition will increase the level of development in the region? Many scholars have studied this issue,basically using per capita GDP or GDP growth rate to reflect the level of regional development,but pure GDP does not fully represent the overall development of a region.How to scientifically assess the problem of tax decentralization,local government competition and regional development level,and deeply analyze its internal logical relationship? We should consider the mechanism of tax decentralization separately other than simply apply the research results of fiscal decentralization to tax decentralization.Therefore,based on the existing research on tax decentralization,firstly this paper uses the relevant theoretical knowledge to expound the influence of the tax decentralization and local government competition on the level of regional development.Secondly,construct indicators of China's tax decentralization,local government competition,and regional development level,and analyze their changing trends.Next,using the data of 30 provinces,autonomous regions,and municipalities directly under the central government(excluding Tibet)from 2000 to 2016 to establish a Space Dubin Model,dividing the country into three major regions of East,Central and West,empirically testing the impact of tax decentralization and local government competition on regional development level.The results of empirical research show that tax decentralization and local government competition and interactions at the national level can significantly improve the development level of the region,the spatial spillover of tax decentralization and local government competition is significantly positive,but the spatial spillover of interaction terms is negative and not significant.In terms of regions,the eastern region is similar to the national situation except the interactions.In addition to the spatial spillover of the interactions in the western region,the other situations are similar to the national situation.Local government competition in the central region is not conducive to regional development.After the addition,and after joining the interaction item,the spatial spillover of the interaction item is significantly negative.Finally,this paper argues that the study of tax decentralization and local government competition on the level of regional development is to regulate the local government's competitive behavior,and to encourage local governments to adopt a “profitable and self-interested” approach to competition,thereby promoting the improvement of regional development.Therefore,this paper proposes several policy recommendations.The first is to rationally divide the financial and power rights of local governments,scientifically design the transfer payment system;Reform the existing performance appraisal mechanism for local governments and establish appropriate incentive mechanisms;Increase investment in the central region and guide the healthy development of the central region;Promote cooperation between local governments,avoid the birth of Bertrand's “inefficiency” game,and encourage competition with positive spillovers.