Research On The Influence Of Tax Decentralization On The Governance Ability Of Local Government

The Third Plenary Session of the 18 th Central Committee put forward the requirement of optimizing the tax system structure,which was also reiterated in the 20 th National Congress Report.The key to optimizing the tax structure is to optimize the tax distribution between the central and local governments,specifically the distribution power of tax revenue.The rational and standardized power of tax revenue not only serves as the cornerstone for ensuring the orderly operation of state power but also acts as the institutional guarantee for mobilizing the enthusiasm of central and local governments and maintaining harmonious relationships between them.Simultaneously,government governance is also one of the major issues in China.The Third Plenary Session of the 18 th Central Committee first proposed to advance the modernization of China’s system and capacity for governance.The Fourth Plenary Session of the19 th Central Committee comprehensively deployed this development strategy,which was further improved and deepened in the 20 th National Congress Report.In the process of China’s economic boom,local governments have played a pivotal role.Especially during the current period of accelerating changes unseen in a century,local governments are faced with a series of opportunities and challenges.How to improve the governance capacity of local governments and promote Chinese modernization is a major proposition of the times.This study focused on the impact of tax decentralization on the governance capacity of local governments.Firstly,the basic concepts of tax decentralization and local government governance were defined.Secondly,the theoretical basis for the impact of tax decentralization on local government governance was expounded.Thirdly,the tax decentralization degree,value-added tax decentralization degree,and enterprise income tax decentralization degree of 30 provinces and regions in China were compared and analyzed.Finally,based on the five factors of politics,economy,rule of law,people’s livelihood,and green,a set of evaluation index systems was constructed to measure the level of local government governance capacity in 30 provinces in China from 2008 to 2020.This study empirically analyzed the impact of tax decentralization on the governance capacity of local governments,and put forward countermeasures and suggestions.Several findings in this study need to be noted.First of all,China’s tax revenue had increased significantly year by year.The tax decentralization degree of 30 provinces and regions had shown an overall upward trend,increasing from42.3% in 2002 to 45.0% in 2020.By region,the overall growth trend of all regions was slow.The degree of tax decentralization in the central and western regions was much higher than that in the eastern regions.Second,in terms of the governance capacity of local governments,the national index had been rising year after year,but there were obvious differences between regions,with the eastern region being much higher than other regions and the gap between the central and western regions being narrowed year by year.Finally,according to the empirical analysis,the improvement of tax decentralization could promote the governance capacity of local governments.The population density,industrial structure,and investment rate also had positive promoting effects,while the unemployment rate had a significant negative effect.In order to make the results more robust,the study also conducted regressions by lagging the degree of tax decentralization by one period and replacing the core explanatory variables.Moreover,different tax categories were further distinguished for regressions.We found that both value-added tax decentralization and corporate income tax decentralization had a significant positive correlation with local government governance capacity,however,the latter could motivate the improvement of local government governance capacity more.Based on the above results,this study proposed the following recommendations: fully consider the relationship between central and local authorities,and clarify the scope of tax power;improve the local tax system and ensure local revenue;improve the efficiency of tax collection and administration,and prevent tax loss;promote co-governance by multiple subjects and improve government governance capacity.