The Research On The Impact Of Local Fiscal Pressure On The Level Of Basic Public Service Expenditure

The reasonable level of expenditure on basic public services and supply structure is one of the important footholds to meet people’s needs for a better life,solve the current major contradictions in China and achieve high-quality economic development.However,local governments may be inclined to reduce the level of spending on basic public services to cope with the increasing financial pressure when they face the government competition and unsustainability of revenue raising.At the same time,after the full completion of the replacement of business tax with value-added tax,China has adjusted the VAT tax sharing ratio in order to cope with the resulting loss of local financial resources.Whether this adjustment plan can effectively compensate for the financial loss of local governments deserves our attention.By measuring and comparing the amount of local VAT and business tax revenues before and after the replacement of business tax with value-added tax,which find that the VAT share adjustment does not effectively compensate for the local fiscal pressure caused by the replacement of business tax with value-added tax.Therefore,this paper is based on the context of the VAT tax sharing reform in 2016 to explores the impact of local fiscal pressure on the level of basic public service expenditures.using relevant data at the prefecture-level city level,collecting and organizing data from 247 prefecture-level cities from 2010-2019 based on data availability and completeness.By constructing an intensity double difference model,examining the correlation between the fiscal pressure of prefectural governments and the level of basic public service provision in order that revealing the influence mechanism that leads to changes in the level of local government spending on basic public services after the full completion of the replacement of business tax with value-added tax.On the one hand,it broadens the scope of research on the impact effect of local fiscal pressure as well as provides new insight and reference for future research on local fiscal pressure and solves the endogenous problem of local fiscal pressure-related research.On the other hand,the all-round research on the impact of local fiscal pressure on basic public service expenditures has certain policy reference significance for safeguarding basic public service expenditures and optimizing the fiscal expenditure structure.The empirical results show that with the increasing local fiscal pressure,the level of expenditure on basic public services presents a significant decline.This means that even under the current policy objectives of "stabilizing growth" and "preserving people’s livelihood",local governments still tend to choose the pressure-reducing strategy of reducing the level of basic public service expenditures.Through exploring the heterogeneous effects of local fiscal pressure on the level of spending on basic public services,which indicates different impact on local fiscal pressure on basic public services from the different scale of non tax income,city sizes,and degrees of marketization.Therefore,in order to alleviate the inhibitory effect of local fiscal pressure on the level of basic public service expenditures and to guarantee a reasonable supply of basic public services,there are some suggestions referring the empirical results: first,to improve the promotion assessment system of officials;second,to deepen the reform of the fiscal and tax allocation relationship between the provincial and sub-provincial governments;third,to focus on the transmission of local fiscal pressure on the level of basic public service expenditures in the future fiscal and taxation system reform;fourth,to establish a sound local tax system.