An Empirical Research On The Influence Of Replacing Business Tax With VAT On The Local Finance In The Western Region

The policy of replacing business tax with value-added tax adjusts to the specific situation of China.For a long period,our country has usually obtained business tax from the tertiary industry and acquired VAT from the secondary industry.With the development of the economy,the links between the secondary and tertiary industries have become increasingly close,and the chain of deductions for the input VAT has been destroyed,which result in duplication of taxation.Therefore,our country start to replace business tax with VAT.This policy aims at reducing the tax for enterprises and stimulate the service industry to make progress.At the same time,the reduction of tax burden for enterprises has an important influence for the local finance,especially for the relatively backward western region.Thus,it is of great importance to know the influence of replacing business tax with VAT on the local finance in the western region.First of all,this paper compares and analyzes the local financial situation of the western region before and after replacing business tax with VAT from three aspects: the local financial resources,the fiscal expenditure and the fiscal balance.Among them,this paper analyzes the local financial resources with the two angles of local tax revenue and non-tax income in the western region.In addition,it chooses the index of the general budget expenditure of local finance in the western district to represent the local fiscal expenditure in this paper.Moreover,it uses the gap of local fiscal revenue and expenditure to study the balance of local fiscal state in the western district.Through the analysis,it finds that the local financial resources are weakened,the local non-tax income increases,the local fiscal expenditure increases,and the local fiscal deficit appears in the western region after implementing the policy of replacing business tax with value-added tax.Then,this paper establishes econometric model to empirically analyze whether these changes of the local finance in the western region caused by replacing business tax with value-added tax.The growth rate of the local tax income,the gap between fiscal revenue and expenditure,and non-tax income,which represent the financial situation in the western region,are regarded as the explained variables,and the economic development level and others variables as the control variables.The main conclusions are as follows: firstly,this action reduces the growth rate of local tax revenue;secondly,it increases the local non-tax income;thirdly,it causes the gap expanding between local fiscal revenue and expenditure in the western region;fourthly,some factors,such as economic growth,also play a vital role for the local finance in the western district.At last,this paper bases on the conclusion from the comprehensive analysis,to provide specific suggestions for solving the adverse effects of the replacing business tax with value-added tax.It includes rational division of the expenditure responsibility between central and local government,reasonable arrangement of financial budget expenditure by local government,perfection of transfer payment system and so on.