Research on Reform of Tax-sharing System in the Background of Tax and Charges Reduction

Abstract

Since 2015, Chinese governments at all levels have been advancing high-frequency tax and charges reduction, and the frequency of charges reductions is surprising. China has continuously deepened reform of tax-sharing system, constantly expanding local government power and increasing economic vitality. In order to promote the sustained and healthy development of China's economy, we should maintain a reasonable scale of government charges, adjust the charges range of the central and local governments, and further improve China's fiscal decentralization system and government charges management mechanism. In this paper, it mainly researches two-way interactive effect between financial decentralization and public service charges. The data of 31 provinces in China from 1999 to 2017 was used to construct the simultaneous equations model for financial decentralization and public service charges, and then the empirical test was carried out for the interactive effect between the two with 3sls method. The research results show that there is a positive interaction between financial decentralization and public service charges. That is, the public service charges is decreased with the increase of the degree of financial decentralization. Local governments gain more power, lower fees and promote economic development. The degree of financial decentralization is increased with the decrease of public service charges. Lower fees mean less government intervention in the economy and the degree of decentralization increases. In addition, the effect degree of the control variables related to financial decentralization and public service charges was analyzed in this paper.