A Study On The Impact Of Urbanization On The Regional Tax Difference In China

Since the reform and opening up,the pace of China’s urbanization has accelerated,and with the deepening of urbanization,population,capital and other resource elements are gathering in large cities,the development gap between regions around social,economic and other aspects is widening.Among them,the imbalance of government tax revenue between regions is a typical feature.As the main source of financial resources for local governments to provide welfare to residents,the excessive difference in tax revenue will restrict the realization of equalization of basic public services and also hinder the promotion of common prosperity.In this context,it is of great significance to study the influence of urbanization level on tax revenue difference.Most of the existing literature analyzes tax revenue difference at the national or provincial level,with little research at the municipal level.Based on this,this paper takes prefecture-level city in China as the research object,empirically analyzes the influence of urbanization development level on inter-regional tax revenue difference by establishing a panel data model.Firstly,this paper uses mathematical and statistical methods to measure the current local government tax revenue difference among cities in China,and provides a more detailed statistical description of the total tax revenue,per capita tax revenue and the proportion of tax revenue to GDP in each region.The results show that the tax gap between regions in China has been narrowing in recent years,but the imbalance in local government tax revenue is still prominent.In addition,this paper uses Thiel index and Shorrocks decomposition method to decompose the tax revenue difference at the spatial and income composition levels.The results show that the current inter-regional tax revenue difference in China mainly derives from the intra-regional difference,which accounts for nearly 80% of the total difference,and the intra-regional difference in eastern and western regions is larger and has gradually increased in recent years;Shorrocks decomposition results show that before the "business tax reform",business tax,as the first major source of tax revenue for local governments,was the main tax type that caused the inter-regional tax gap,and as VAT substituted it,the VAT revenue ratio increased and became the main reason for the inter-regional tax gap.And then,based on the scale effect theory,agglomeration effect theory and growth pole theory,this paper analyzes the tax effects brought by consumption and investment in the urbanization to clarify the mechanism of the role of urbanization level on tax revenue differences.This paper establishes a two-way fixed-effects panel model and selects data from 276 prefecture-level cities from 2007-2020 as the sample for empirical analysis.The results show that the level of urbanization promotes the per capita tax revenue significantly,and also widens the tax revenue differences between regions.Quantile regression results show that as the quantile level increases,the level of urbanization contributes more significantly to high per capita tax revenue levels.From a sub-regional point of view,the impact on the eastern region is higher and not significant in the central,western and northeastern regions,and the financial gap between local governments is further aggravated by the "Matthew effect".Finally,the paper further analyzes the impact of urbanization level on VAT and income tax,finding that the effect of urbanization on VAT is better than that of income tax.As the main source of tax difference between regions,the positive impact of urbanization level on VAT further expands the tax revenue gap between regions.Based on the conclusions of the study,two recommendations are made by this paper.On the one hand,local governments should actively promote urbanization construction,make full use of the economic effects of urbanization development to increase the scale of tax revenue and alleviate the financial pressure brought about by the rise of the government’s rigid costs in the process of urbanization;On the other hand,it is necessary to establish a fiscal and taxation system that is compatible with the development of urbanization to narrow the gap in the financial resources of local governments,and achieve the development goals of coordinated development and equalization of basic public services.