Empirical Study On The Effect Of Effective Tax Rate On Economic Growth In China

Taxation is the important source of fiscal revenue in China and an important means for the government to realize public functions.Tax revenue can regulate economy by allocating social resources,adjusting income distribution,influencing material and human capital investment and residents' production and consumption behavior,and playing an important role in economic growth.After several times of tax reform,China has established the basic framework of modern tax system.The main concern of this paper is whether it promotes or inhibits economic growth,and whether it has different influence in different regions.Firstly,this paper theoretically explains the important influence of tax on economic growth.According to the different objects of taxation,this paper divides the taxation into capital income tax,labor income tax and consumption tax.We introduce the methods for calculating the three effective tax rates,and calculate effective tax rates of the whole country and three regions based on the provincial panel data of China from 2001 to 2017,and give a statistical description.The result shows that the effective tax rate of capital income is the highest among the three effective tax rates,and the level of overall tax rate is the highest in the eastern regions.Based on the calculation results of effective tax rate,we makes an empirical study on the effect of effective tax rate on economic growth.We analyze the impact of three effective tax rates on economic growth by establishing regression model.It shows that effective tax rate has a certain impact on economic growth.As for the nation,effective tax rates of capital income and labor income are negatively correlated with economic growth,while effective tax rates of consumption is positively correlated with economic growth.As for the eastern and middle regions,the effective tax rate of capital income and labor income are negatively correlated with economic growth,while the effective tax rate of consumption is positively correlated with the economic growth.As for western region,the three effective tax rates are negatively correlated with economic growth.Then,we make the dynamic analysis of the effects of the three tax rates on economic growth.We establishing a panel VAR model,and use impulse response function and variance decomposition method to explore the influence.As for China,the impact of the effective tax rate of capital income on economic growth was negative at the beginning;the impact of the effective tax rate of labor income at the beginning,and began to have a negative impact in the first period.;the impact of the effective tax rate of consumption on economic growth was positive.As for the eastern region,the effective tax rate of capital had a positive impact on economic growth at the beginning,but turned negative after the second period;the impact of effective tax rate on economic growth was zero at the beginning and negative after the first period;the impact of effective tax rate of consumption on economic growth has turned from positive to negative.As for the middle region,the effective tax rate of capital has a negative impact after the first period,the effective tax rate of labor income has a negative impact on economic growth,and the effective tax rate of consumer spending has a positive impact.As for the western region,the impact of effective tax rate of capital on economic growth turned from negative to positive;the effective tax rate of labor income and consumption both had a positive impact on economic growth at the beginning,and the effective tax rate of labor income turned to negative impact after the first period.Variance decomposition shows that the three effective tax rates have different effects on economic growth.In the end,we summarize the conclusions of this paper and put forward some suggestions.The government should reduce the tax of capital income,improve the labor income tax system and adjust the structure of consumption tax,and formulate tax policies based on the time lag and regional differences.