Study On The Influence Of Transfer Payment On Local Financial Self-sufficiency In Shanxi Province

The reform of the tax sharing system in 1994 straightened out the fiscal relationship between the central and local governments,increased the proportion of central government revenue in total government revenue,and enhanced the state’s ability to conduct macro-control.With the development of China’s economy and the change of the political environment,the fiscal system of the tax sharing system has gradually exposed many problems that need to be solved urgently.One of the most important problems is "transferring financial power from one layer to another and transferring administrative power from one layer to another".The financial self-sufficiency of the grass-roots governments is worrying.In order to make up for the financial gap,the central government established a transfer payment system.As China enters a new stage of fiscal and taxation system reform,how to promote the financial self-sufficiency of local governments through appropriate transfer payment scale has become the main issue to ponder.In addition,it is also worth investigating the mechanism through which transfer payment affects the local financial self-sufficiency.The economic development of each county in Shanxi Province is not balanced,Some counties have good economic development,but some counties are very poor.On the whole,the financial revenue and expenditure gap of the county government in Shanxi Province is expanding year by year,and the financial self-sufficiency capacity is gradually decreasing,Shanxi can be studied as a typical region.Taking Shanxi Province as an example,this paper discusses the effect and mechanism of transfer payment on local financial self-sufficiency.First,based on the previous domestic and foreign literature on transfer payment,tax competition,tax efforts and local fiscal revenue and expenditure,straighten out the mechanism of transfer payment affecting local fiscal revenue and expenditure.Secondly,from a theoretical perspective,this paper reveals the effect of transfer payment on local financial self-sufficiency,and then discusses the mechanism of transfer payment on local financial self-sufficiency under the action of tax competition and tax effort as two intermediary variables,and puts forward the hypothesis after theoretical analysis.Finally,from the empirical point of view,taking117 counties(districts)in Shanxi Province as the research object,the county panel data from 2010 to 2020 are analyzed empirically.In this process,the panel regression model is used to verify the impact of local transfer payments on local financial self-sufficiency.Secondly,the intermediary effect model is used to explore the effect mechanism of transfer payments on local financial self-sufficiency through tax competition and tax effort.Finally,the panel threshold model is used to explore the effect of transfer payments on local financial self-sufficiency when tax competition is the threshold variable.After the above analysis,this paper concludes: first,transfer payment in Shanxi Province has a significant negative effect on the local financial self-sufficiency.Further analysis shows that the general transfer payment is negatively correlated with the local financial self-sufficiency,while the special transfer payment and tax refund are positively correlated with the local financial self-sufficiency.Second,transfer payment not only has a direct impact on the local financial self-sufficiency,but also indirectly affects the local financial self-sufficiency through tax competition and tax efforts.On the one hand,transfer payments will have a positive effect on local fiscal self-sufficiency by alleviating inter-regional tax competition.On the other hand,transfer payment will have a negative impact on local financial self-sufficiency by inhibiting local governments’ tax efforts.Third,the higher the degree of regional tax competition,the increase in the scale of transfer payments can reduce the negative impact on local financial self-sufficiency.Further analysis shows that the higher the degree of regional tax competition,more general transfer payments can also reduce the negative impact on local financial self-sufficiency.The impact of special transfer payments and tax rebates on local financial self-sufficiency presents a "U" shape.Based on the conclusion of this paper,some policy suggestions are put forward on improving the transfer payment system,expanding the local financial resources and clarifying the division of financial powers below the provincial level.