Study On The Pulling Effect Of Investment On Tax

Since China’s reform and opening-up, China’s economy has been developing rapidly and created huge economic wealth. Behind the miraculous growth of China’s economy, it is investment as an important driving force that drives and promotes China’s rapid economic growth sustainably, so China is a typical mode of investment-driven economic development. Currently, China’s economy is slowing down to a more mature pace and the structural tax cuts are being implemented. In this circumstance, the government’s fiscal revenue would fall significantly short of expenditures, so that many local governments boost investment to stimulate economic and improve competitiveness, thus develop new tax fund. Therefore, fixed investment is not only an important support for the rapid growth of China’s economy, meanwhile, also has a significant impact on tax revenues. In some sense, the investment plays the decisive role in national income growth, also in the growth of tax revenue. This context analyzes the relationship between investment and tax, focuses on the effect of investment on tax. The study has profound practical significance, because it can explain why local governments still thirst for investment, and give advices for the improvement and transformation of China’s investment-driven economic growth.In the research on the relationship between investment and tax, the paper focuses on the influence of investment on tax. Firstly, after the review and summary for the related research at home and abroad, the paper carries on the theoretical analysis on the relationship between investment and tax, and gives two paths on how investment impact tax revenue, the direct way of which is to generate related tax revenue directly in the process of investment in fixed assets; the indirect way is that investment impacts tax revenue by means of the intermediate links--economic growth. Then the paper applies elastic analysis on investment and tax. Secondly, this paper makes an empirical analysis on the correlation between investment and tax revenue. After testing the stationary of time-series data by Unit Root Test, the article performs Co-integration Test with the data, which show there is a long-term equilibrium relationship between investment and tax, then use Granger Causality Test, VAR model, Impulse Response Function and Variance Decomposition, to dynamically analyze the direction, magnitude and timing paths with fluctuation of the mutual influence of two series in detail. Thirdly, in the case part of article, based on introducing the status quo of Jinan’s fixed assets investment, the paper analyzes26key investment projects in Jinan, and measures how much tax revenue and other social and economic benefits each project is expected to bring in, to prove the stimulating and pulling effect of fixed-asset investment on regional economy and tax revenue with the actual case. Finally, on the basis of the analysis above, the paper makes recommendations to the investment situation of our country and Jinan from the national level and local government level respectively.