Tax Expenditure Cost-benefit Analysis

Through departure from the basic tax system, tax expenditure, with the same nature of financial subsidy, is the favorable arrangement for tax payers in order to achieve certain political, economical or social purposes. Theory of expenditure by tax is widely applied around the world, therefore, only by using a certain method to evaluate the effect, the scale and the structure of tax expenditure can we fully take hold of taxation system so as to improve tax favor and beget management effectively.With the establishment of a socialism market economics system in China after the adoption of an open policy and reform, Tax Expenditure systems were also set up and developed gigantically. Especially during the initiating of the open policy and reform, Tax Expenditure arrangements play an important role with respect to the attraction of foreign funds and introduction of advanced science and technology from foreign countries.Along with economic growth in high-speed and the membership of the World Trade Organization (WTO), Chinese Tax Expenditure systems will be enriched with more contents. Based on such a background, the thesis took the method of Cost-Benefit Analysis as the cutting point of discussing tax expenditure in policy and practice, following puts forward some suggestions on Chinese reformation of Tax Expenditure.The thesis involves six parts:Part 1, a quotation of theory. It mainly brings up Cost-Benefit Analysis from the selected topic background, and has given the explanation of the research results and the article structure.Part 2, the introduction of tax expenditure. The concept and the general form of tax expenditure have been introduced. And it divided tax expenditure into three types, the goal of which are economical development, social stability and the development of politics, military, diplomacy, science, education, culture and health etc.Part 3, the significance of Cost-Benefit Analysis in tax expenditure. It introduces the concept and background of operation of Cost-Benefit Analysis in tax expenditure, and then explains the necessity from four aspects.Part 4, the evaluation of the tax expenditure' cost. As one of the principal part, it covers the evaluation of direct cost which includes the cost of tax expenditure the can and cannot reduce the income of the government directly and indirect cost that are hard cost and hard cost.Part 5, the evaluation of the tax expenditure' benefit. As another one of the principal part, according to the classification, it estimates the benefit of tax expenditure. The tax expenditure with the goal of developing economics is evaluated mainly by model, and tax expenditure of other goal is mainly evaluated by quantifying the result of sample investigation.Part 6, the adjustment of tax policy and budget control based on Cost-Benefit Analysis of tax expenditure. As the conclusion, it first introduces the using of tax expenditure' Cost-Benefit Analysis. According to the using, it covers how to adjust the tax policy and budget control.