Tax Reform Research Of China Under The Condition Of Financial Crisis

Currently, the impact of the US sub-prime crisis turned world financial crisis is being strongly felt in China owing to the global economic integration. China's national economy, which is still in transition from a planned economy to a market one, has been dealt a heavy blow. How should the country's tax system be reformed to help the nation through the global financial crisis? This is not merely a matter that Chinese top policy-makers have to ponder, but one that both the tax authorities and all taxpayers are concerned about. This paper, based on an analysis of the deficiencies in the country's existing tax system, comes up with some suggestions aiming at its betterment in line with China's realities. The text consists of two parts: First, the way is pointed to the selection of proper tax policies as well as to the administration over tax collection in the context of the ongoing financial crisis. Besides, the relationship between tax game and tax reform is analyzed. Second, how to adapt each type of tax to the financial crisis is treated, and some concrete suggestions are advanced.In this paper, the author has set forth the following things: To begin with, more recently, as the international financial crisis is intensifying, the voice of all social communities for further tax cuts is getting increasingly higher. Through the analysis of tax-reducing theories and their practical effects, it is pointed out that, as far as China's tax policies are concerned, we should only resort to structural adjustments featuring reducing taxation in some sectors while increasing taxation in others, considering the fact that, quite a number of tax-cutting measures having already been taken, State revenues and expenditures being under great pressure, there is no room for further large-scale tax cuts. Secondly, tax game necessitates continual optimization of tax system, thus fresh tax system being brought about in the long run. It follows that, in designing our tax system, we should take into account not only the targets of the state tax policies but the interest of the taxpayers of different categories as well. In other words, the state targets can never be regarded as the only base for enacting tax system and policies. Thirdly, the so-called "revenue-centeredness', i.e., the fulfillment of the preset quota for taxation being mistaken as our primary goal in practice, claims serious consequences, either tax over-collection or under-collection. To tackle this problem, the author has conceived a concrete plan for the reform of China's administration over tax collection. Fourthly, against the backdrop of the financial crisis, what we ought to do with each type of tax is to optimize its system, priority being given to improving the systems concerning value-added tax, consumption tax, corporate income tax and personal income tax.The author has included in the paper the specific plan issued by the Chinese government on January 1, 2009 regarding the shift of value-added tax from a production-based one to a consumption-based one, foreseen some possible problems caused by the shift, suggested some countermeasures, and expounded on the significance of the shift to the development of China's economy. Besides, while unveiling some loopholes in the existing system regarding the consumption tax in the scope of tax collection, the author has put forward the principles guiding the reform of the consumption tax, together with detailed reform scenarios. Furthermore, the author has elaborated on the impact of the unification of two different kinds of corporate income tax on China's economy. In conclusion, the author has exposed some problems existent in the existing system regarding personal income tax and meanwhile pointed a way for its further reform.