Tax Sharing Incentives and Industrial Structure Changes in China
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| Title | Tax Sharing Incentives and Industrial Structure Changes in China
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| Author | Xie Zhenfa and Liu Li |
| Organization | Xiamen University |
| Email | xzf@xmu.edu.cn; 123494509@qq.com |
| Key Words | Tax Sharing; Economic Development; Industrial Structure; Change from Business Tax to Value-Added Tax |
| Abstract | The paper studies the effect tax sharing incentive between central and local governments imposes on the local governments’ efforts level, which causes the changes in the industrial structure. And the efforts level of local governments is also constrained by the economic development, which also affected the changes in the structure of the industry. Using the panel data from 1998 to 2011 in 30 provinces and the Dynamic Panel Data-System GMM method, this paper conducts an empirical analysis on the impact of tax sharing differences, economic development and other related factors contributing to the changes of the industrial structure. It is found that the relationship between the tax differences brought about by the sharing ratio between business tax and VAT and the industrial structure was significantly positive. As a result, the changes of the industrial structure caused by economic development are mainly characterized by the development of the manufacturing industry. The findins suggest that VAT sharing ratio should be unified after the change from Business tax to VAT in order to reduce its distorting effects on the industrial structure. |
| Serial Number | WP461 |
| Time | 2013-06-26 |
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