Study On The Impact Of Consumption Tax Revenue Sharing Mechanism Reform On Local Fiscal Revenue

Full implementation of the Business Tax to VAT reform in China in 2016,Sales tax,which was an important source of revenue for local authorities,was replaced across the board.Although local governments have redefined their VAT revenue sharing ratios,there is still the inevitable problem of reduced local revenues.With the increase in the scale of tax cuts and fee reductions,the mismatch between local government revenues and expenditures in China has gradually increased.New crown outbreak in 2020 adds to local government revenue and expenditure conflicts.Local governments are under dual pressure to combat the new crown pneumonia epidemic and to vigorously implement tax and fee reduction policies.Therefore,reforms are used to increase local revenues and ensure that local government revenues and expenditures are matched.The reform of the inter-governmental tax revenue sharing mechanism has become a breakthrough in reform.Meanwhile,China’s consumption tax revenue has been increasing in recent years,accounting for a stable average of around 7.5% of China’s tax revenue.The reform of the revenue sharing mechanism for consumption tax has thus become a hot topic in China’s tax reform.In 2019,the State Council issued the Promotion Plan for Adjusting the Central and Local Revenue Division Reform after Implementing Larger Tax and Fee Reductions.The document makes it clear that the direction of consumption tax reform is to move back the collection of consumption tax and steadily transfer it down to the local level.Subject to manageable levy,Gradually move some existing consumption tax items levied at the production(import)stage to be levied at the wholesale or retail stage.Original partial approved base,transferred from local to central.The incremental part will in principle go to the local area.In line with the direction of national policy reform and combing through relevant literature.It is clear that the two key points of the current reform of the revenue sharing mechanism of consumption tax are the backward shift of the collection process and the devolution to localities.This paper takes these two key points as the subject of study,explaining the necessity and feasibility of reforming the revenue sharing mechanism of consumption tax and summarised and analysed the current status of excise revenue.Insights from international practice on consumption tax revenue-sharing mechanisms and revenue-sharing models.Further preliminary design of specific proposals for reform of the revenue sharing mechanism for consumption tax.First consider the feasibility of collection and design the collection process according to the characteristics of the tax category.Secondly,revenue sharing is designed according to the type of tax and the collection chain.Transfer of excise duty on cigarettes and alcohol to the central government,Incremental consumption tax on refined oil and small cars devolved to localities,Revenue sharing mechanism reform programmes for other items with dynamic adjustment mechanisms as appropriate.Meanwhile,this paper selects data for 2019 to measure,further simulation analysis based on the impact effect of the reform proposal on the fiscal revenue of Guangxi Zhuang Autonomous Region.It was found that the reform could increase Guangxi’s consumption tax revenue by RMB 3.687 billion.After the reform,the proportion of tax revenue to general public budget revenue in Guangxi increased by 2.04%.It shows that through the reform of the consumption tax revenue sharing mechanism,it can bring a certain amount of incremental tax revenue to Guangxi and play a role in expanding local revenue sources.It also demonstrates the feasibility of the reform proposal for the revenue sharing mechanism for consumption tax designed in the previous section.In conclusion,it is proposed that the rate and scope of consumption tax should be appropriately adjusted,change of in-price tax to out-of-price tax,rationalisation of excise duty down-grading schemes and use of internet platform to identify tax information and improve supporting collection and management.