Research On The Impact Of Tax And Fee Reduction On Local Fiscal Pressure And Its Mitigation Mechanism

Continuous large-scale tax and fee cuts over the years have played an important role in stimulating market vitality and promoting high-quality economic development.However,this has led to a decline in tax revenue,coupled with the economic downturn and the imperfect fiscal and tax system,and many other factors.The gap between local fiscal revenue and expenditure has increased,and the fiscal pressure has further increased.We adopted structural tax and fee cuts,universal tax and fee cuts,and a new combination of tax and fee support policies to cut taxes and rebates and achieved positive results.From2019 to 2021,the annual increase in tax and fee cuts will exceed 2 trillion yuan,2.5 trillion yuan,and 1.1 trillion yuan respectively.In the first half of 2022,tax rebates and cuts are expected to reach 2.5 trillion yuan.At the same time,however,rigid fiscal expenditure,coupled with institutional factors such as unclear powers and expenditure responsibilities among local governments and irregular division of fiscal revenue,has led to a continuous decline in the level of macro tax burden and a gradual increase in the financial pressure on local governments.In order to realize the sustainable development of finance and ensure the steady operation and healthy development of macro-economy,we need to pay attention to the financial pressure of local governments.It is of important theoretical and practical value to explore the ways of tax and fee reduction affecting local fiscal pressure and the mechanism of fiscal pressure relief.Guided by the tax effect theory and combined with the fiscal expenditure theory,this paper gradually returns the tax reduction and fee reduction and fiscal pressure of 31 provinces and cities and conducts heterogeneity test,and makes an in-depth analysis of the impact ways and mitigation mechanisms of tax reduction and fee reduction on local fiscal pressure from the short and long term.The results show that the current tax and fee reduction will increase the current local financial pressure,and the relatively small impact on the developed eastern regions,while the greater impact on the central and western regions.The tax cut with a lag of one to four periods and the fee cut with a lag of one to six periods will still increase the current fiscal pressure.A delay of five or six installments of tax cuts will relieve some of the fiscal pressure,but not significantly.It can be concluded that tax and fee cuts will indeed increase the financial pressure on local governments in the short term.In the long run,tax and fee reduction can indirectly increase fiscal revenue by conserving tax sources,expanding tax base and promoting economic growth,but the effect of alleviating local financial pressure is not satisfactory.Tax and fee cuts are not permanent and their marginal effect is decreasing.Longterm and sustained tax and fee cuts will aggravate financial risks.Therefore,it is necessary to optimize the tax and fee reduction policies and improve the accuracy,pertinency and stability of their implementation.In this regard,from the perspective of fiscal expenditure,this paper proposes to strengthen budget performance management,and spend every penny to the most appropriate place;We will ensure that government spending is balanced and balanced,ensure the bottom line of the "three guarantees" at the community level,attach importance to the function of government security and development,and ensure that people’s livelihood,wages and operations at the community level are guaranteed before we use government spending in other areas,optimize the structure of government spending,and reduce unnecessary spending.The direct mechanism of financial funds will be constantly improved and normalized to improve the efficiency of fiscal expenditure;The target of fiscal expenditure should serve the policy suggestions of economic transformation from scale and speed growth to high-quality development,realizing effective improvement of quality and reasonable growth of quantity,and helping local fiscal expenditure efficiency to maximize,so as to reduce financial pressure and better realize sustainable financial development.