Research On Tax Economic Freedom In China

This paper constructs the tax economic freedom theory, based on the economic freedom philosophy, ethics and economics as well as tentative studies. In accordance with this theory, it builds an indicator system evaluating the taxation freedom level from three aspects, tax scale, tax structure, and the tax revenue utilization direction. Based on this system, this study further measures and evaluates statistical significance of China’s taxation freedom with empirical data. Main factors are covered influencing economic freedom of taxation in the econometric method, Panel Data model with fixed effect. This study also conducts econometric test about effect of the tax economic freedom degree on fairness and efficiency. Below are main conclusions of the empirical research:First, from 1994 to 2013, China’s economic freedom of taxation was on the rise; from 1994 to 2012, the degree in 31 districts rose; in 2013, that level in districts except Beijing and Shanghai dropped. From 1994 to 2013, the taxation freedom level was higher in Guangdong, Beijing, Zhejiang, Shanghai and Tianjin, and lower in Gansu, Hainan, Qinghai, Heilongjiang and Guizhou.Second,when the tax is included, the freedom level reflected by the base value in private sector is lower than that with tax deducted.Third,the progressive degree of tax and the proportion of public good spending in fiscal expenditure are positively correlative with the freedom degree, while the macro tax burden level and tax illusion degree are negatively correlative with that. Fourth, the economic freedom of taxation has negative effect on narrowing the urban-rural income disparities, and positive effect on economic growth, which proves that three indicators of the welfare economics, taxation freedom, fairness and efficiency, have not been completely uniform in China.Major revelatory conclusions of this study are as follows: As the marketization improves, the overall freedom level of taxation in China tends to be on the significant rise, but the situation differs in specific districts. The market needs to play a more decisive role in resource allocation, which implies there is a long way to go in economic transition. It has been proven in China that tax collection from the government produces negative welfare effect on economic freedom. Therefore the taxation reform should underline targets in economic freedom goal besides fairness and efficiency. Both tax-related and non-tax-related factors are connected with economic freedom of taxation, which differs in effect aspect and degree. Thus all-round reform and improvement in economic system is needed to raise the freedom level of taxation. Based on empirical data, there is further space in China to coordinate freedom, fairness and efficiency, three goals of the welfare economics.