A Study On The Tax Policy To Stimulate The Consumption

The consumption demand, investment demand, export demand are thethree important factors which can boost a country’s economic growth,they play different roles in the economic growth. However, since a longtime, China’s economic development has formed the formation of emphasison investment and exports, and put little emphasis on consumption.Thissituation will do harm to the further development of our economy. In orderto counter the effects of the financial crisis and the complicatedinternational economic situation, the way to stimulate consumptiondemand has become the research hotspot. According to the government’seconomic functions in the market economy, it can use the tax policy asan effective tool to promote the citizen consumption. In this way we tryto study how to stimulate the consumption by tax policyThe main contents of this paper include: firstly, looking into therelationship between tax and consumption, and the way it works. It issaid that tax policy changes the consumption demand by two ways. One ofthem is income effect. And the other is substitution effect. Typically,when the personal income tax decreases, the personal income increases.Because of income effect, residents increase consumption. When consumption tax or property tax is based on the different commoditytaxation, it creates a substitution effect, which makes the structureof citizen consumption change. Secondly, in recent years, our countryadopts the tax policy in order to stimulate consumption. By analyze theaffect of the policies, and according to the referenced data of Wuxi City,I make a conclusion that how the tax policy affecting consumption. Finally,through the materials which are collected about three countries whichare involved in this financial crisis，England， India and Greece, Ianalysis how these three countries adopt tax policy to stimulate consumerspending in order to boost the economy. Try to find out the policyadvantages and disadvantages.Through the research, I obtain the following conclusions:(1) payattention to the income tax in order to stimulate consumption: reformthe tax system, combined with the composite system, improve the incometax progressivity.(2) pay attention to the consumption tax in order toguide consumption: define the scope of the taxation, tax is not includedin the calculated price;(3) pay attention to the property tax in orderto stimulate consumption: property tax reform, expand the tax base,implement general property tax, raise the income tax progressivity, setup the estate and gift tax.