Research On The Main Local Tax In China

Business tax is a kind of shared taxes, but business tax has been the main local tax since the reform of the tax system in fact, because business tax plays an important role in local fiscal revenue, regional economic development and so on. But business tax will eventually be replaced by VAT with the reform program to replace the business tax with a value-added tax. The main tax plays an irreplaceable role in the local fiscal revenue and expenditure, so the main local tax is necessary. This paper discusses the issue of optimal selection of main local tax.This paper analyzes the problem in five parts.The first part clarifies the background and significance, then summarizes current research, finally points out the inadequacies and innovation in this paper.The second part analyses basic theory of main local taxes. First, this part defines the meaning of main local taxes. Secondly, the paper discusses the necessity to determine the main local tax from the perspective of the local revenue. Then the paper determines the criteria of the main local tax. Finally, the part analyses the characteristics of main local tax.The third part discusses the growth trend and proportion of local taxes, then discusses the impact on the total amount and structure of local taxes. Based on this, the paper summarizes the current features of local tax system. Then, the paper studies the current situation of main local tax. China is facing the problem of lack of main taxes after the reform program to replace the business tax with the VAT.The forth part discusses whether a local tax can replace business tax, as the new main taxes. This section gives the conclusion from the perspectives of the revenue adequacy, stability, and the growth potential, theoretically there are some taxes in line with the requirements of the main tax taxes in local tax system. To rebuild the main taxes, China has to reform these taxes.Part V is some advice about optimization of main local tax. First, this part analyzes from two perspectives of revenue sources and influence, and ultimately give the conclusion that property tax is the most suitable main local tax theoretically. However, because Chinese current property tax still has many problems, so it can’t replace the role of business tax in the short term, it must be reformed. Then, this part gives some proposals on rebuilding the main tax. In the short term, China can increase the proportion of VAT share of local government, which is a temporary solution to the problem of insufficient local revenue. Because the tax base of VAT has liquidity, it is not a suitable main local tax for long term. In the long term, the reformed property tax will be the main local tax, the focus of reform is the points which do not meet the criteria of the main local tax.The innovation of this paper is the main tax impact on local government policies and practices, and two different proposals from short-term and long-term perspectives. Then the paper points out that the most important thing is how to ensure the local financial revenue and minimize the cost of reform. The inadequacy of this paper is that the analysis about main local tax is not profound enough.