Research On The Legal Governance Of Harmful Tax Competition Between Local Governments

Tax competition is a neutral concept,based on the positive external effects of tax preferences and the intergovernmental game relationship.The standardized operation can effectively promote regional economic government.On the other hand,the vicious tax competition would deviate from the principles of tax law and justification.Governance is therefore required.Reasonable identification of vicious competition in taxation is a prerequisite for its governance,and it must be comprehensively evaluated in terms of purposes,methods and results.The empirical research on vicious taxation competition should focus on analyzing its harm and causes.The main manifestations of the current taxation vicious competition are multiple and miscellaneous tax preferential policy documents and “migratory bird” migration of enterprises under taxation depression.This kind of competition has resulted in multiple harms and negative effects on the state,local government and enterprise,thus becoming the realistic basis for its governance.The main causes of vicious competition are the contradiction between local revenue and expenditure as well as the irregular tax expenditures at the level of fiscal and taxation system;the insufficient hierarchy of taxation and ambiguity in local tax legislative powers from the perspective of legislation and;lack of expertise and competence in the taxation judicial review mechanism at the judicial level.These drawbacks should also be considered in the future regulation.Competition neutrality and tax statutes has provided logical guidance for the legal governance of local taxation vicious competition.Competitive neutrality aims to restrain the non-neutral behavior of government intervention in the market.One of fundamental principle for the competition neutrality on the governance of tax vicious competition is tax neutrality.It generally requires the uniform application of tax incentives in the same industry and eliminates unreasonable competitive advantages obtained by some enterprises.For local application,tax neutrality can be incorporated into the fair competition review system on the basis of referring to the extraterritorial system in order to ensure the neutrality.In the legal taxation context,the existence of local tax legislative power is reasonable,and the author will further propose the use of tax preferential legislation as the governance of vicious competition in taxation Logic.The statutory taxation preference provides ideas for the cleanup of the existing relevant policy documents as following: the legal codification is applied into the legislation in order to achieve systematization and legalization of tax preferences;the principle of liquidation is to adhere to statutory tax preference,and to remove the documents which violates the principles of statutory legislative subject and statutory content;the treatment is to “identify” firstly and then “clean”,namely,”identify” requires to sort out the documents by types while “clean” focuses on to ensuring the effective of cleaning.In addition,the statutory tax incentives also require the establishment of a unified legal system of tax incentives and a standardized system of taxation expenditure.In view of the relationship between central and local governments and the independence of local governments’ interests,the key to the governance of the vicious tax competition is to maintain the standardized operation of tax competition,so as to prevent the alienation of tax competition while protecting local financial rights.In view of the flood of current tax preferential policies,the fair competition review mechanism can be introduced to effectively review and clean them up,which is a short-term governance strategy.In terms of long-term governance,it is necessary to establish a unified legal system of tax preferences to prevent the dissimilation of tax competition.The core is to implement the statutory tax preferences and define the local tax preference right in it,so as to respond to the legislative issues.In addition,we should set up the corresponding safeguard mechanism to support the governance effect of tax vicious competition.One of the design of the system is to standardize the tax expenditure system,so as to restrict the tax expenditure budget,and then solve the problem of non-standard tax expenditure.The second part of the system design is to improve the tax judicial review mechanism,and solve the problem of low supervision efficiency of the current tax judicial review mechanism by clarifying the review institution and its jurisdiction and improving the prosecution mechanism.