The Research On The Impact Of Horizontal Tax Competition On Economic Fluctuation In China

Since the implementation of tax distribution reform in China,local governments have participated in the competition of tax resources or economic resources through tax policies to attract floating factors,enrich tax sources and expand fiscal revenue.In order to compete for resources to the maximum extent,local governments abuse the power of tax collection to carry out extensive tax competition,which has seriously damaged the tax order of our country and caused a shock to the macroeconomic stability.Based on panel data of 30 provinces,municipalities or autonomous regions from 2003 to 2019,this paper analyzes the impact of horizontal tax competition on economic fluctuations.Firstly,through mechanism analysis,it is found that horizontal tax competition will influence economic fluctuations from three intermediary channels: industrial structure,total factor productivity and international trade.Secondly,it is found that horizontal tax competition has a significant positive correlation with economic fluctuations by analyzing the current situation of the whole sample and the sub-sample.Thirdly,the effects of horizontal tax competition on economic fluctuations are empirically tested by empirical analysis.The results show that: during the sample study period,the increase of horizontal tax competition intensity will intensify economic fluctuations;Mediation effect shows:the increase of horizontal tax competition will restrain the upgrading of industrial structure and the improvement of total factor productivity,promote the development of international trade and increase the probability of economic impact from external risks,thus aggravating economic fluctuations.Horizontal tax competition has significant spatial spillover effects.Horizontal tax competition has a positive impact on the regional economic fluctuations,and a negative impact on the economic fluctuations of the surrounding areas and areas with similar levels of economic development.Based on research conclusions,relevant policies are suggested to standardize the order of horizontal tax competition in China and suppress economic fluctuations: Improve the government performance evaluation system to promote the smooth operation of the macro economy;To Achieve the industrial structure’s transformation and improvement by making full use of the tax policy;Compliance with good development requirements to increase the full productivity of all factors;We will foster a sound international trade environment and actively guard against and respond to external risks.