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Tax and Fee Reduction:Requirements, Space for Improvement and Policy Options (No.34, 2019)


By Li Ying, China Development Research Foundation

Research Report, No.34, 2019 (Total 5534) 2019-3-18

Abstract: The internal and external environment changes including the global tax cut drive, the sluggish domestic aggregate demand, the heavy tax burden on enterprises and their wish for tax reduction by a big margin have triggered greater demand for tax and fee reduction from all circles of life. However, the foreseeable decline of fiscal revenue growth and the rigidity of fiscal expenditure have squeezed the space for further tax and fee reduction. To improve the effectiveness of the proactive fiscal policy in 2019, the government needs to implement a contractionary policy, reduce regular expenditure and optimize the structure of fiscal expenditure and enhance governmental capital efficiency for further tax and fee reduction. The following policy measures are raised for both short-term and long-term tax and fee reduction. In the short run, more effective measures for tax and fee reduction conducive in guiding social expectations need to be taken. Efforts need to be made to accelerate the simplification and merger of VAT rate, gradually bring down the business income tax rate of general enterprises, and lower the contribution of social insurance premiums in step with strengthening their collection and management. In the long run, work needs to be done to deepen the institutional reform of finance and taxation systems, including enhancing the stability and foreseeability of the tax regime through the implementation of the statutory taxation principle, fulfilling the scheduled plan by designing mid-to-long-term budget and adjusting the taxation structure in order to enhance the function of taxes as an automatic stabilizer.

Key words: tax and fee reduction, reform of finance and taxation systems, strive to improve the effectiveness