| Since 1978 when China carried out its Reform and Opening policy, she has been experiencing a unique market transition process from a planned economy to a socialist market economic system. In this context of economic restructuring, the relationship between tax and economic growth has its particularity about which the theoretical community still lacks of systematic research. In this thesis, the issue of taxation and economic growth has been studied both in theory and practice from three levels of demand, supply and institution.The research framework and major conclusions are listed as below after the "Introduction":The second chapter has studied the special mechanism of how China's tax revenue affects the economic growth. Demand, supply and systems have played key role in China's economic growth, which determines the tax impact on economic growth in the three paths. The tax's impact on the economy can be seen from two dimensions:the taxes levied actually by the government and the taxes the government can not collect which should be levied by the measure of taxation law, due to a variety of reasons, such as the level of the tax collection and management.The tax's impacts on the economic growth are from the two different directions at the same time. This is the important characteristics of how the tax impacts on economic growth in transition of China. And almost all researches on taxation's impact on economy I can find are limited within the first dimension. This study is mainly focused on the first dimension, combined with the second dimension partly.As a theoretical support of my research, the theory about the shift and the incidence of the tax must be re-examined and expanded. Whenever a new tax system is established, the real tax burden will always be inconsistent with the tax burden of design. The theories about the shift and the incidence of the tax are based on the tax which the Government could collect under some tax system. Measured by tax policy, the tax the Government does not levy or fails to collect is part of the same socio-economic benefits related to adjustments and of the nature of the taxation. In China, since the public economy is in the dominant position, and its higher level of taxes enable other economic sector's evasion taxes to be shifted more and form a higher excess profits.In Chapterâ…¢, the author studies the impact of taxation on economic growth from the demand side.First I integrate theoretical and empirical research home and abroad demonstrating the demand effect on economic growth in a long-term, and then analyze the demand-side of China's economic growth, especially problems constraining the consumer's demand and its tax reasons within it. Based on vector autoregressive (VAR) model, the interactive relationship between taxation, income distribution gap, the rate of household consumption and economic growth has been found. Studies have shown that tax revenues will affect the income distribution by acting on the consumer and thus have an impact on the long-term economic growth.Conclusion:There exists cointegration relationship among the consumption rate, macro-tax rate, the Gini coefficient and economic growth and the three variables have a positive contribution on economic growth in the long-term economic growth, consumption has played an important role in the rate of increase in consumption,and it will promote economic growth. The impact coefficient of taxation on economic growth is the smallest one, but it is also a positive effect, indicating the changes in macro-tax burden will promote economic growth. The proportion of household consumption increases by 0.1, the economic growth rate by 1.07; overall tax burden increased by 0.1, the economic growth rate increased 0.32, the Gini coefficient increases 0.01, to increase the economic growth rate 0.106. The effect coefficient of the Gini to consumption is negative, indicating that the degree of inequality in income distribution increased, the rate of increase in consumer decreased. The response of consumption to the macro-tax rate shows that the effect of start is positive and then negative. An increase in macro-tax burden will eventually reduce the population's disposable income and thus the rate of household consumption will be negatively affected. To a certain extent, macro-tax burden's increase in the more distant future years will limit the expansion of income inequality.Chapter IV explores the impact of taxation on economic growth from the supply-side. China's economic growth in transition is mainly driven by physical capital, meanwhile, human capital and technological progress also play an increasingly important role. From the degree of tax-related considerations, this chapter has focused on analysis of taxation through the role of these three aspects of the impact on economic growth. And using provincial panel data the analysis of taxation on economic growth in different regions have also been given.In this chapter, the author analyzes quantitatively taxation capital accumulation and economic growth, taxation and human capital and economic growth, taxation and technological progress and economic growth based on VAR model. I have also analyzed the relationship between industrial enterprise income tax and the industrial output at the provincial level panel dataConclusion:There exists a unique cointegration relationship among taxes, GDP, private capital and public capital. Private capital and tax on the gross domestic product have a positive effect, while public capital to GDP has negative effects.1% of increase in private capital will lead to the increase of 0.8389% in gross domestic product; increase of 1% in public capital,0.2853% of reduction in gross domestic product; increase of 1% in taxation, increase of 0.0581% in gross domestic product. Public capital has a negative effect on the private capital, the reasons of which may be that the public capital has a crowding-out effect, or the supply of public capital is inadequate. The impact of taxation on private capital effect is positive, and continues to grow. The impact of taxation on the effects of public capital is positive. Private investment, commodity tax and income tax is of cointegration relationship. In the long term, commodity tax increases for every 1%,the private investment will increase 2.44%; income tax increasing for every 1%,the private investment will see the reduction of 0.67%.Gross domestic product, tax and public expenditure on education are of a unique cointegration relationship. The effect of public human capital responding to taxes is positive, and it will continue to increase, indicating that increased tax revenues on public expenditure on education has a positive effect.The time series of overall tax burden, total factor productivity growth, financial technology spending growth and GDP growth rate are of a unique cointegration relationship. The total factor productivity growth and IT spending have a positive effect on economic growth, while tax on the economy growth rate have a negative effect. Science and technology investment to economic growth made the greatest contribution. The effect of total factor productivity growth rate by the tax impact was positive or negative twist. The effect of IT spending responding to the macro tax burden has been positive. The panel data analysis shows that there are 18 regions where the level of domestic industrial average tax burden significantly non-zero coefficient.Overall, the negative effects is smaller in the eastern than it in the central and western regions, and the negative effects of the geographical distribution concentrate mainly in the central and western regions.Chapter V discusses the impact of taxation on economic growth from the institution level. The major factors in institutional change-changes in ownership structure and the open-door policy have been researched. Meanwhile, the author explores taxes'significant impact on them. The relationship between taxes and property is mainly as follows: providing a supply of institution for the property structural changes and causing a certain degree distribution of social resources to private in a non-normative way. The issue of implementation mechanisms on taxation as a kind of system in transition period has been studied. Using VAR model I have analyzed the quantitative relationship among tax, property rights of structural change and economic growth, and taxation, import and export and economic growth. I have also researched the relationship between tax incentives, FDI and the economic growth.Conclusion:There exists a unique cointegration relationship between the proportion of non-state economic investment representing the proportion of non-state-owned property and its tax revenue and economic growth. The increase in the non-state property has a positive effect on economic growth, rather than the proportion of its revenue, the negative effects of economic growth. The proportion of the non-state economic investment increases 1%, the lnGDP will increase 0.2269. The proportion of non-state tax increases 1%, the lnGDP will increase 0.1089. The positive impact of tax on non-state-owned property makes a continued positive effect, which is due to the gap between the proportion of tax revenue and the weight of the property. This gap means a vast difference in tax burden in different types of business registration which is in varying degrees in public property.Chapter VI gives the conclusion. Major findings of the paper have been generalized and policy implications have been revealed.
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