Chinese-style Tax-Sharing System, Tax Collection Centralization and Tax Competition
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| Title | Chinese-style Tax-Sharing System, Tax Collection Centralization and Tax Competition
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| Author | Xie Zhenfa |
| Organization | Department of public economics, School of Economics, Xiamen University, Xiamen |
| Email | xzf@xmu.edu.cn |
| Key Words | Chinese-style Tax-Sharing System; Tax Collection Centralization; Tax Competition |
| Abstract | Focusing on the corporate tax reform in China, the paper puts the dynamic role of the central government into the tax competition between provinces. In theory, the point of views in this paper are, comparing to the hypothesis of "top-down yardstick competition", the hypothesis of tax competition between jurisdictions is more suitable to explain the tax strategic interaction between Chinese regions; Chinese-style tax-sharing system could mainly avoid the vertical tax competition issues; the center government has an incentive to increase the extent of tax collection centralization to compress the space of tax competition between local governments. In the empirical, the paper uses the spacial instrumental variables model to estimate tax competition between provinces before and after 2002, and test the effects of tax collection centralization on tax competition between provinces after 2002. The empirical results show that, the corporate tax reform in 2002 significantly reduced the level of tax competition between regions, tax collection centralization increased the effective tax rate and offseted the level of tax competition between provinces after 2002. |
| Serial Number | WP766 |
| Time | 2014-11-25 |
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