Tax Burden, Regulations and Development of Service Sector in China

Abstract

ABSTRACTThis paper investigates how to exert extensive effort to implement “streamlining administration and tax cuts” reform in the service sector in China. In our conceptual framework, four hypotheses are proposed. One general hypothesis is that tax burden and regulations have negative effects on the development of the service sector, and the other three hypotheses explore the effects vary by economic development level, economic cycle and industry categories. Using province-level panel data set over the period 2004–2013, we find strong evidence that four hypotheses are confirmed. This suggests that “streamlining administration and tax cuts” reform should be implemented according to different conditions in terms of locality, time and industries.