Study On The Effect Of Economic Openness On Tax

Based on the analyses in the development path of openness and tax,the paper studied the mechanism of openness on tax.Then empirical tests were done to explore the effect,using provincial panel data of China between 2001 and 2015.Results show that:(1)the economic openness will significantly promote the scale of tax base and have a positive effect on tax revenue in China,which is reflected in domestic tax and also reflected in VAT,BT,CIT and PIT.While the structure of openness shows opposite effect,where the increase in the proportion of OFDI will suppress the expansion of tax revenue,reflected in the reduction of the scale of VAT,CIT and PIT.The result generally shows that the economic openness has expanded the tax base and promote tax revenue.(2)the change in openness will not significantly change the central-local tax revenue structure,which shows that economic openness will not lead to deterioration of the financial state in either the central government or the local government;(3)the economic openness will increase the ratio of income tax to total tax revenue,making China’s tax revenue depend more on the source of income tax,while the structure of openness shows opposite effect.This indicates that economic openness is gradually shifting China’s tax structure to double-principal tax system;(4)Moreover,government funds which shows as earmarked sundry tax exhibits relatively stability in revenue,which indicates that the economic openness does not lead to the Chinese government’s raise of government funds for specific expenditure,and it will not lead to the alienation of the Chinese government’s income-raising behavior.Generally,there exists positive effect of economic openness on tax.Therefore,we should remain committed to the path of open development and further improve economic openness.In the meanwhile not only should we improve the Local Tax System and optimize the tax structure,but also we should take active part in formulating the international taxation rules,and cooperate with main economic organizations around the world to fight for the tax rights and benefits.