The Study On Tax Policy To Promote The Rural Financial System Construction In China

The development of modern economy is inseparable from the financial sector，through which social idle funds could get better configuration.Individuals, businesses,organizations who needs funds will be able to use these funds for consumption,production or operations. Finance is able to distribute funds equally, so it is guiding andinitiative to promote economic development. Since the Reform and Opening-up, therapid economic development of the urban of china is extremely fast, while agriculturehas made tremendous sacrifices for the industry,resulting that a large income gapbetween urban and rural. Currently, it is urgent to develop rural economy, thegovernment also puts the rural economy as the most important issue. To develop ruraleconomy well and rapidly needs the support from rural financial system, and thecharacteristics of agriculture means rural finance is risky and low profitability.Meanwhile, urban-rural dual structure makes the situation even more severe in ruralfinance. Rural finance can greatly enhance the level of social welfare, if governmenthelps financial system establish and improve, it could promote rural economicdevelopment.So far, our rural financial system includes Agricultural Development Bank of Chinawhich stands for policy finance, Agricultural Bank of China and Postal Savings Bank ofChian which stand for commercial finance, rural credit association which stands forcooperative finance, agriculture insurance which is insufficient supply and informalfinance. The problems of this system are: First, each formal financial business is notsuited to the requirements of the development of rural finance; Second, the illegal statusof informal finance is inappropriate; Third, the burden on local financial institutions istoo heavy, but the funds are pulled out; Fourth, the overall shortage of rural financialsupply makes it can not provide adequate financial support for rural.In this study, methods of literature analysis, normative analysis and empiricalanalysis, comparative analysis were employed. Through inductive research to literature,the relationship between rural finance and economy, the affecting elements of ruralfinance are clarified. Through normative analysis of the role rural financial systemshould play, appropriate and reasonable rural financial system is established. Throughempirical analysis of the current situation of rural finance structure and functional status, identify the problems exist in current system. By comparing the differences of thepolicies between developed and developing countries, to find a way to establish ruralfinancial system in tax policy.Through this study, we found that in order to change the status of China’s ruralfinancial supply, and to promote the development of the rural financial system, thesupport of tax policy is necessary. Levying business tax is not only heavy burden on thepoor rural financial institutions, but also distorting regular economic decision whichmake by financial institutions. All these result to the insufficient supply of rural finance,in order to avoid this problem happening again, reduction or exemption on business taxof rural financial institutions should be executed. Corporate income tax is fairer thanbusiness tax, which is levied on the amount of income after some deduction. During thestage of set up and development in rural financial institutions, the reduction orexemption of income tax, break-even policy, emergency depreciation should beprovided. Surtax is levied by a certain percentage on the basis of business tax, incometax on the additional, which is mainly for raising revenue for the local financial. Thesurtax preferential treatments should also be given when the rural financial institutionsget business tax, corporate income tax preferential treatments.Of course, the development of the rural financial system also needs the cooperationand support of other policies, such as legislation, government-led insurance. Thenecessary methods to establish and improve rural financial system is the joint efforts ofvarious policies.