The Perfection Of Local Tax System In China

Most of the research on the relationship between taxation and public services is from the perspective that taxation is the financial security of government to provide public services,but less from the perspective of certain incentives of providing public service.In fact,the structure of the tax system can influence the choice of government behavior,and thus will influence the incentives of government to provide public services.In practice,local government's behavior choices often reflect the pursuit of capital and growth,such as investment attraction and duplicate construction,and the public interest represented by public services is relatively less concerned.The imperfection of the local tax system has further leaded the behavior choices of local governments to growth,and the incentive function of tax system to public services has been underutilized.The tax reform in 1994 initially constructed the framework of China's local tax system,which played a significant role in promoting the enthusiasm of both central and local government.However,this enthusiasm is more reflected in economic development than in public services.Since then,the reform of some kind of local taxation has been carried out continuously,but the overall construction of the local tax system has always been in a relatively lagging position.In 2016,the “VAT reform” was fully implemented,from the perspective of reforming the proportion of value-added tax sharing,the mode of tax sharing has been further strengthened,and how this model motivates the local government needs further observation.The report of the 19 th National Congress of the Communist Party of China specifically proposed to deepen the reform of the taxation system and to improve the local taxation system,which highlighted the urgency and importance of improving the local taxation system in the new era of the taxation reform.This paper integrates public services into the target orientation of improving local tax system,analyzes the endogenous incentive mechanism for public services in local tax system designing.The study find that the liquidity of tax sources and the pursuit of public service can introduce competition mechanism into local public services,and can encourage local government to compete to attract tax sources to increase tax revenue.The capitalization of tax base establishes a tax compensation mechanism for public services,stimulating local governments to expand tax base and raise tax revenue by improving the level of public services in the region.Analysis of the current local tax system in China,there are still some shortcomings in exerting the incentives for providing public services: First,the main body of local tax system is absent,so that the incentive mechanism fails to form a stable expectations through tax revenue;Second,the tax source is concentrated in production and circulation,and tax revenue comes mainly from production,which makes it more likely to be put into production;Third,the taxpayer's structure is unbalanced,the main taxpayers are enterprises,who pursue profit and growth rather than public services;Fourth,the tax base of property tax is not scientifically determined,because the value added of real-estate brought by public services cannot be converted into tax revenue.By analyzing the local tax systems of developed countries such as the United States,the United Kingdom,and Japan,the article finds that although these countries have different considerations and regulations on the size of tax rights,the scale of tax revenue,the choice of tax types,and the design of tax systems.One thing is common.In addition to the functions of raising fiscal revenues,the local taxation systems of these countries contain some tax incentives,which encourage local governments to provide public services actively.Based on this,it is suggested that the construction of local tax system in China should give full importance to the endogenous incentive effect of the tax system,and take the benefit tax as an integral part of the main body of local tax system.However,considering the principle of prudent transition,it is recommended to implement this goal step by step: In the short term,reform the principle of VAT revenue sharing,which shares income among regions based on consumption;In the medium term,expand the base of personal income tax,and make it to be the main taxation of provincial government;In the long term,take the assessed value as the base of property tax,and make it to be the main taxation of the county government.