The main reasons for the reform of tax management system in China are that the phenomenon of illegal tax reduction and exemption by local governments is very common at present, and the lack of local main taxes leads to local governments relying too much on non-tax revenue. The reform of tax management system will have an important impact on China's local government's investment policies, local government revenue sources, the establishment of local tax system and the way local governments regulate the economy.

First, the background analysis of China's tax management system reform

At present, China's tax management system reform mainly has the following two background factors.

(A) The phenomenon of illegal tax reduction and exemption by local governments is getting worse.

At present, in order to attract foreign investment, all localities have given foreign businessmen various preferential policies, especially tax incentives, at all costs. According to China's current tax management system, local governments at all levels have no right to formulate tax reduction or exemption policies except those explicitly authorized by the central government. However, the reality is that in order to attract investment, local governments have overstepped their authority to formulate various "local policies" for tax reduction and exemption, including tax reduction and exemption before tax payment and tax refund after tax payment, that is, tax refund after tax payment. After tax payment is put into storage, finance will "refund the treasury" and return the tax to enterprises. Because some taxes are enjoyed by the central and local governments, if the local governments reduce or exempt them without authorization, it will be tantamount to depriving the central government of revenue in disguise. In 2004, the State Administration of Taxation carried out a large-scale inspection on the preferential tax policies of development zones, and found that more than 2,527 enterprises in development zones across the country had problems in registering in the zone and operating outside the zone, which was close to half of all the enterprises inspected. During the inspection, we also found problems such as expanding the scope of application of tax incentives, increasing the proportion of preferential treatment, extending the preferential period, and reducing or exempting taxes in violation of regulations. The accumulated tax underpayment of illegal enterprises reached 430 million yuan. At the same time, the tax authorities also cleared out 88 local tax-related documents that did not meet the provisions of the tax law. (4) State Taxation Administration of The People's Republic of China announced the Announcement on Carrying out Investigation on the Implementation of Tax Reduction and Exemption Policies, and investigated all kinds of tax reduction and exemption that the tax authorities are responsible for collecting and managing. Such a large-scale investigation reflects that the State Administration of Taxation attaches great importance to the current tax reduction and exemption, which is precisely because the local government's illegal tax reduction and exemption has led to vicious local competition, which has seriously hindered the rational allocation of resources and the coordinated regional development of China's economy.

(B) the lack of local main taxes, leading to local governments relying too much on non-taxpayers.

At present, there are many taxes in the local tax system, but there is a lack of long-term stable taxes that have a decisive impact on local financial resources. The tax sources are scattered, subject to many factors and have little potential. Moreover, the local government's tax management authority is too small, and the legislative power of local taxes is concentrated in the central government. The governments below the provincial level have no legislative power of local taxes, and local governments cannot raise income by opening taxes according to the local public expenditure needs and local regional characteristics. The dependence of local governments on tax revenue is too small, and local tax revenue is far from meeting the needs of local fiscal expenditure F ",and they are increasingly dependent on various extra-budgetary income and debt income. Taking Shanghai as an example, Shanghai's urban construction has developed rapidly and taken on a new look. However, the funds required for building projects are huge, and the existing budget is only a drop in the bucket. In the 1980s and 1990s, the Shanghai Municipal Government mainly relied on the proceeds from state-owned land resources, directly or indirectly borrowed money, and promoted social funds to participate in urban construction through government credit, etc. to raise huge urban construction funds. In the ten years since the mid-1990s, Shanghai has raised funds 1000 billion yuan through land leasing. (2) Land resources are huge wealth in the hands of the government, thus becoming the main source of income for local governments. In addition, although borrowing is an important way for foreign local governments to obtain income, because China prohibits local governments from issuing bonds, local governments issue corporate bonds in large quantities through subordinate investment companies and provide guarantees for them to obtain funds for urban construction. For example, Shanghai municipal and district (county) governments have set up many government investment companies as their financing subjects. For example, the municipal government has ten investment companies, and the district (county) governments have two to five investment companies. Some companies are not profitable at all, and some are simply borrowing companies. They rely on their government background to invest in debt, and most of the debts will be borne by local finance, thus bringing greater financial risks to local governments.

Second, the impact of China's tax management system reform on local governments

Although different regions have different regional characteristics, the reform of tax management system will have a greater impact on local governments in the following four aspects.

(A) the policies adopted by local governments to attract investment will be diversified.

Through the reform of tax management system, the central government will strengthen the management right of central taxes such as enterprise income tax and value-added tax and enjoy taxes, while the lack of local main taxes has little impact on enterprises. Therefore, the effective preferential tax policies that local governments can use when introducing foreign capital will be very limited. Moreover, the central government will gradually reduce local preferential tax policies, and the regional competition factors in taxation will be greatly weakened. The central government once gave preferential tax policies to the eastern coastal areas, which made the policy advantages of this area more obvious and greatly promoted the strength and effectiveness of attracting investment. After the reform of tax management system, in order to maintain the regional competitive advantage, accelerate the pace of attracting investment and promote the development of local economy, all localities need to change the past phenomenon of relying too much on tax reduction and exemption, single policy, and then vicious tax competition. Local governments will do more to improve the investment environment, provide policy support for local advantageous industries, continuously optimize their industrial structure, and maintain local competitive advantages. In order to maintain its strong economic growth and regional advantages, the eastern coastal areas should change from relying only on tax reduction and exemption policies to relying on the strong financial resources of local governments to improve the investment environment and government service level, and change the past practice of blindly providing preferential treatment to all foreign-funded enterprises, establish special funds, and give support to enterprises that meet the development direction of local industries and high-tech and modern service enterprises, so as to effectively introduce funds, promote industrial adjustment and promote regional economic development.

(B) Local government revenue sources will be standardized.

At present, local governments mainly obtain income from three sources, namely, taxes, income from state-owned resources and borrowing. They have their own characteristics: although land resources can bring great wealth to the government, it is difficult to trade in a fair and transparent market-oriented way because of the high cost of supervision and transaction in the transfer of land use rights, which will affect the standardization of government financial resources and the image of the government. Borrowing is an important way for foreign local governments to obtain income, especially when the funds raised are used for urban infrastructure projects that benefit future generations, which conforms to the principles of efficiency and fairness. However, a large number of local governments in China raise construction funds by issuing corporate bonds through their subordinate investment companies. Because the relationship between these enterprises and the government is very vague, when the debt financing of these enterprises cannot be paid due, they will find various reasons to rely on the government to repay their debts, which leads to the lack of hard constraints on the collection and use of debt funds, while the government has created huge debt risks. The tax is based on the law, which is transparent and predictable, and can standardize the source of government revenue and embody the principle of public finance.

After the reform of the tax management system, when the local main taxes have not been established, the income from land resources will still be an important financial source for local governments. As long as the government optimizes the local investment environment, does a good job in infrastructure construction and public services, and increases the intensity of attracting investment, it can promote the appreciation of real estate and obtain huge fiscal revenue. However, in the long run, local governments will use the increased local tax management power to open new taxes according to the needs of public expenditure and regional characteristics, speed up the cultivation of local main taxes, and raise necessary funds in the form of taxes for public welfare undertakings, infrastructure and public services, so as to increase the proportion of tax revenue in government revenue, thus making the way for the government to obtain revenue more transparent, certain and standardized.

(3) The local government will establish a tax system with property tax and behavior tax as the main body.

Judging from most mature market economy countries, local governments basically take property tax as the main tax. On the one hand, property taxation has the regional characteristics of wide distribution of tax sources, which is convenient for local governments to strictly monitor tax sources and improve the efficiency of tax collection and management; On the other hand, the financial expenditure target of property tax revenue is mainly to provide local public goods, which greatly embodies the principle of reciprocity between negative tax and income. Property tax is the main property tax in China at present, but the proportion of property tax in provinces and cities is still relatively low. Take Shanghai as an example. In 2003, real estate-related taxes accounted for less than10% of Shanghai's local fiscal revenue, while the local tax with a higher proportion was business tax, accounting for 37%. However, in the new round of tax reform, with the expansion of the scope of value-added tax, the scope of business tax collection will be reduced. Moreover, the central government put forward the reform idea of property tax, that is, the existing urban real estate tax, property tax and urban land use tax with the nature of property tax will be merged into a unified property tax, and the scope of its taxation will be gradually expanded, and the taxation of urban residents' own occupied housing will be resumed, and the scope of property tax collection will be expanded to rural areas when conditions are ripe. It can be predicted that with the development of urban construction and local economy, and the acceleration of urbanization in counties and townships, the real estate industry will continue to develop, which will provide sufficient tax sources for property tax, greatly increase the proportion of property tax revenue in local fiscal revenue, and increase the proportion of real estate in personal wealth, which will also enhance the regulatory function of the tax, which will make property tax the main tax category in the local tax system.

In addition, after the reform of the tax management system, all localities can also levy new taxes that conform to regional characteristics and are conducive to local economic development and increase fiscal revenue. The author thinks that we can consider levying behavior taxes such as environmental tax and education tax. With the gradual development of the economy, the scale and quantity of enterprises have increased rapidly, especially some manufacturing enterprises, which are large in scale and have great pollution. While making great contributions to the local economy, they also have a serious negative impact on the urban appearance and people's living environment. Local governments can combine existing sewage charges and garbage charges into standardized environmental taxes in accordance with the principle of "whoever pollutes pays taxes" and combined with tax and fee reform. Higher taxes are levied on pollution behaviors such as waste gas, waste water and solid waste discharged by enterprises, and the income is used exclusively for the improvement of urban environment, which not only corrects the pollution behaviors of enterprises, but also raises a large sum of money for urban environmental construction. In addition, the development of local economy needs to improve the basic quality of residents and increase the number of talents in higher education. Besides introducing high-quality talents from other places, it also needs the government to increase investment in local education. Therefore, some existing scattered education fees, such as education surcharge, can be merged into an independent education tax, so that a large number of stable and reliable funds can be raised for the development of education in a standardized way. In addition, local governments in many developing countries levy taxes on various forms of entertainment. As an important local financial source, we can actively study the introduction of new taxes such as entertainment tax according to local actual conditions, thus eventually forming a relatively stable local tax system with property tax and behavior tax as the main body.

(D) the way local governments regulate the economy will be more in line with the principles of market economy.

For a long time, due to the lack of local main taxes and the limited tax autonomy of local governments, it is difficult to adjust the local economy through local tax policies. Instead, it directly intervenes in the economy through fiscal expenditure policies and other administrative orders, which greatly increases the market transaction cost, which not only has poor adjustment effect, but also causes great efficiency losses. After the reform of tax management system, local governments can make use of more independent local tax management power to formulate reasonable local tax policies to regulate the economy, rationally allocate resources, reduce direct administrative intervention to enterprises and individuals, standardize, legalize and stabilize the relationship between the government and market players, and promote the development of market economy and the benign growth of regional economy.

When property tax becomes an important source of local income, it is easy to overemphasize its financial function and ignore its regulatory function. Property tax will not only be an important source of income for local governments, but also a powerful policy tool for local governments to adjust resource allocation and income distribution. By taxing the residents who own real estate, the behavior of individuals in real estate can be adjusted in line with the principle of efficiency. In recent years, the real estate market in various places has developed rapidly, and the price is soaring. Through the powerful policy tool of property tax, local governments can not only obtain inexhaustible financial resources for a long time, but also influence the real estate price, control and guide the irrational behavior of real estate traders, and finally promote the healthy development of the real estate market and the whole local economy. Moreover, with the continuous expansion of the scale of real estate, a large number of disposable personal income has been transformed into different types of real estate, which accounts for an increasing proportion of personal wealth. Taxation on it can become an important means to adjust the distribution of personal income. In addition, behavior taxes such as environmental taxes can correct the behavior of enterprises and promote the rational allocation of resources. According to the production or discharge of enterprises, environmental taxes are levied, so that enterprises can internalize the external costs caused by social environmental damage into their own costs. In this way, enterprises will consider the cost of pollution when doing cost-benefit analysis, so as to make production decisions in line with the efficiency of resource allocation.

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