Abstract
This paper aims to study the mechanism of how economic growth and tax reform affect total tax revenue and structure over the period (1950-2011). On the basis of the introduction of China’s previous main measures in tax reform, this paper uses methods as descriptive statistics, multi-segment linear regression model and principal component analysis to analyze how economic growth and tax reform affect the total tax revenue and structure mainly from three aspects as the total amount of the tax, the value-added tax and the corporate income tax, which are under the background of tax reform. The empirical results show that economic growth not only has a significant impact on the total tax revenue and structure changes, but also has a long-term stability relationship with total tax revenue. And in a long term, there is no extraordinary growth of tax revenue. In addition, every tax reform shows a clear impact on the tax structure, while the impact of changes in the total tax revenue is diminishing over time.
Highlights
From the year 1950 to 2011, China had mainly experienced seven tax reforms respectively in 1953, 1958, 1973, 1980, 1983, 1984 and 1994, and current complex tax system which is mainly composed by value-added tax and enterprise income tax is formed
How to evaluate the seven tax reforms in an economic sense? What are the impacts of tax reform on the total amount of tax and structural changes? And how does it affect the relationship between taxation and economy? Researches on these issues prove helpful for mechanism of how economic growth and tax reform affect total tax revenue and structure, and provide empirical test for how tax reform promotes economic growth and affects tax amount and structure
In order to study the effect of economic growth and tax reform on the tax effects of changes in volume and structure since the founding of China, the paper describes seven major tax reforms from the year 1950 to 2011, this description is mainly focused on the change of the total number of taxes, because taxes and structural changes are closely related to the total number of taxes
Summary
From the year 1950 to 2011, China had mainly experienced seven tax reforms respectively in 1953, 1958, 1973, 1980, 1983, 1984 and 1994 (the number of China’s tax reforms during this period is more than seven, but these seven reforms on which this paper focuses are the most leading ones), and current complex tax system which is mainly composed by value-added tax and enterprise income tax is formed. If dividing the evolution of the China’s tax system into three periods, the first period is from China when establishing a unified national tax system in 1950 to the reform and opening up in 1979. During this period, China experienced three large tax reforms respectively in 1953, 1958 and 1973 whose general guiding principle is to simplify the tax system and further weaken the tax functions. Based on the thinking above, the purpose of this paper is to study how the tax amount and structure were affected by the economic growth and tax reform in. The rest of this paper is organized as follows: The second section is a review of related recent literature; the third section is the study methods and data; and empirical analysis and some conclusions are in the fourth and fifth sections respectively
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