Study On The Impact Of Tax And Fee Reduction On The Scale Of Local Government Debt

The policy of cutting taxes and fees stimulates the vitality of market entities by adjusting preferential tax policies and deepening reform of the tax system.As the policies of tax and fee cuts continue to be deepened,local fiscal revenue has fallen,placing a huge economic burden on local governments and leading to the growing debt of local governments.However,the long-term goal of the tax and fee reduction policy is to promote the transformation and upgrading of the economy,improve the economic growth rate by stimulating the vitality of market players and creating job opportunities,and bring more economic benefits,so as to increase the fiscal revenue of local governments and reduce the debt pressure.Therefore,it is necessary to consider the relationship between tax and fee reduction policies and local government debt from multiple perspectives,in order to fully evaluate the effect and feasibility of the policies.The research idea of this paper combines the current background of tax reduction and fee reduction in China with the current literature on local government debt and tax reduction and fee reduction policies.This paper uses the government debt data of 293 prefecture-level cities from 2016 to 2020 to empirically test the relationship between tax reduction and fee reduction and the scale of local government debt.In the main regression part,this paper uses the scale of local government debt as the explained variable and the ratio of general public budget revenue to GDP as the explanatory variable for regression.And on this basis,the establishment of intertemporal impact measurement equation into the regression test of the long-term impact of the policy.Secondly,in order to further find the heterogeneity of the impact of tax and fee reduction on local government debt,this paper conducts grouping regression.This paper finds that:(1)In the short term,tax and fee reduction will lead to the increase of the scale of local government debt.But in the long run,the policy will help reduce local government debt.(2)In the eastern region,tax and fee reduction policies will promote the expansion of local debt scale;In the Midwest,that’s less true.(3)Compared with regions with low economic growth pressure,tax and fee reduction policies in regions with high economic growth pressure have a more significant effect on the growth of local government debt scale.(4)Compared with areas with low administrative efficiency,tax and fee reduction policies in areas with high administrative efficiency play a more significant role in promoting the scale of local government debt.(5)From the perspective of transmission mechanism,this paper proves through empirical test that tax and fee reduction reduces the scale of long-term local government debt by promoting the formation of high-quality local tax sources;The tax and fee reduction policy will increase the scale of short-term local government debt by raising the level of local fiscal deficit.Tax and fee cuts will help reduce long-term local government debt by promoting local economic transformation.In the robustness test,this paper starts from three perspectives.(1)This paper evaluates the reliability of per capita local government debt balance as the explained variable and the proportion of tax revenue in GDP as the core explanatory variable.(2)In order to solve the endogeneity problem,this paper uses the two-stage least square method and takes the VAT rate reduction as an instrumental variable to conduct an in-depth study on its internal mechanism.(3)Robustness estimation is carried out by transformation model.After the above tests,the research results of this paper are still significant.Therefore,the research results of this paper are reliable.From the perspective of tax reduction and fee reduction policies,this paper studies the impact of tax reduction and fee reduction on the scale of local government debt,enriching the research on the relationship between tax reduction and fee reduction and the scale of local government debt.In addition,different regions,economic growth pressure and government administrative efficiency are divided,grouping regression tests the heterogeneity and comparative analysis,from a new Angle to study tax and fee reduction policies.In addition,this paper analyzes the influence mechanism.It further improved the research on the relationship between tax and fee cuts and high-quality tax sources,focused on the level of local government fiscal deficit and the differences in the industrial structure of prefecturelevel cities,and provided new thinking for actively promoting the policy of tax and fee cuts.