Introduction
The issue of finance and taxation is the core issue of modern national governance, and the modernization of tax system is closely related to the modernization of the country. This paper reviews the effect of the full implementation of value-added tax reform, individual income tax reform from classification to comprehensive reform, as well as resource tax, environmental protection tax reform and other “three taxes” reform in ten years, discusses the historical transformation of China’s tax system from traditional tax system to modern tax system, and analyzes the impact of China’s tax reform on implementing new development concepts and building a new tax system pattern. The importance and far-reaching impact of promoting China’s economic transformation and upgrading, equitable income distribution and high-quality development; On this basis, it further discusses how to follow the essential requirements of Chinese-style modernization and how to serve high-quality development by tax reform, and how to serve Chinese-style modernization by tax modernization.
The path and function analysis of tax reform
China’s tax modernization reform started late, but it has made great achievements. The comprehensive implementation of value-added tax reform, individual income tax reform from classification to comprehensive reform, as well as resource tax, environmental protection tax reform and other “three taxes” tax system reform, not only promoted the historic transformation of China’s tax system from the traditional tax system to the modern tax system, but also for China’s new development stage of economic transformation and upgrading, fair income distribution and high-quality development has a vital role and far-reaching impact. At present, the emphasis on the social adjustment function of tax needs to be strengthened, and the theory of tax system, tax structure, tax design, tax principles and other aspects need to be further reformed and optimized.
As early as 1984, China tried value-added tax on some products. Subsequently, in the context of tax sharing reform, after eliminating the product tax that led to double taxation in 1994, China levied value-added tax and business tax respectively on the sale of industrial and commercial goods and the provision of labor services in the service industry, and implemented the transformation reform from the production value-added tax that cannot be deducted by equipment to the consumption value-added tax that can be deducted by equipment in 2008. In order to solve the contradictions and problems of double taxation and increased tax burden caused by the application of different tax systems for goods and services, the executive meeting of The State Council in 2011 decided to take the lead in replacing business tax with value-added tax (hereinafter referred to as replacing business tax with value-added tax) in Shanghai from January 1, 2012 on the transportation industry and some modern service industries that were originally subject to business tax. On May 1, 2016, the reform to replace business tax with value-added tax was fully implemented nationwide, business tax was cancelled, the pilot scope was extended to the construction industry, real estate industry, financial industry, and life service industry, and the value-added tax included in all new real estate of enterprises was included in the scope of deduction, ensuring that the tax burden of all industries was only reduced and not increased, thus completing the historic reform of replacing business tax with value-added tax.
Figure 1. Reform of China’s tax system under common prosperity goal
After the full implementation of the replacement of business tax with VAT, in order to cope with the complex and changeable domestic and foreign environment under the new situation, China further implemented large-scale and sustained tax reduction and fee reduction policies, of which VAT reduction and tax rebate have played a huge role. Since April 1, 2019, the VAT withholding tax refund system has been piloted, and the incremental tax withholding tax credit for taxpayers is refunded in whole or in part. In 2022, the VAT tax refund policy will be further strengthened, and all tax refund funds will be directed to enterprises, so that enterprises can enjoy the VAT refund dividend.
The individual income tax reform has promoted the realization of common prosperity
At present, the social adjustment function of China’s personal income tax is not obvious, which is not conducive to the adjustment of the rich and the poor and the benefit of the people through taxation. Adhering to the concept of sharing and common prosperity is the ultimate goal of our country’s economic and social development and social progress. With the development of economy, the income level of Chinese residents has increased, the accumulation of social wealth has increased, and the contradiction between the difference of income level and the difference of property possession has become more and more prominent. Therefore, it is urgent to promote the reform of individual income tax from classification to classification and comprehensive taxation, and the combination of basic and special expenses deduction, so as to reduce the tax burden of low – and middle-income groups, promote fair income distribution, and achieve common prosperity.
For a long time, China’s individual income tax has been implemented with the individual as the tax unit to carry out the standard deduction of expenses, and the paying unit to withhold and pay the classified individual income tax. Although this method has the advantages of simple collection and management, the prominent problem is that the basic expense deduction can not objectively reflect the actual living expenses of different individuals, and the classified collection is easy to cause the tax burden imbalance between individuals with a single income and multiple incomes, and between individuals with different burdens, so that the individual income tax can not be truly realized and levied. To this end, China has in 2005, 2007 and 2011 carried out individual income tax amendments, but limited to the actual conditions of collection and management, the reform of individual income tax according to inflation and personal basic living expenses needs, the implementation of the corresponding reform to increase the personal income tax deduction standard as the main content.
Figure 2. Tax Administration Reform in China in: IMF Working
Since October 1, 2018, China has first increased the exemption amount of wage and salary income under the classified tax system model, applied the new tax rate, reduced the burden on residents, and released the tax reduction dividend of individual income tax reform in advance. Since January 1, 2019, the newly revised Individual Income Tax Law has been officially implemented, marking the transformation from traditional individual income tax to modern individual income tax. The personal income tax reform reflects the successful experience of China’s personal income tax system reform integrating the domestic and foreign reforms, is of milestone significance, effectively cracked the personal comprehensive income tax collection and management problems, and fully reflects our country’s increasing tax governance ability and comparative advantages.
The new trend of deepening the reform of the “three taxes” tax system
The socialist system determines that every adjustment of the tax system is people-centered, takes the protection of the people’s interests as the priority, and is consistent with the policy and practice of tax modernization, which is the essential requirement and important content of the tax system with Chinese characteristics. Starting from reform and opening up, China’s modern tax reform has gone through several stages: profit tax reform, tax sharing system and modern tax system reform. In the guiding ideology and principle of taxation, it has experienced a change from emphasizing the concept of raising fiscal revenue through taxation to gradually paying attention to and emphasizing the social redistribution function of taxation, and gradually attaching importance and urgency to optimizing the tax structure, gradually increasing the proportion of direct taxation and strengthening the rule of law of taxation.
China’s tax reform highly emphasizes and pays close attention to tax theory, tax structure, tax use, tax rule of law, and the social function of modern taxation to adjust the rich and the poor and benefit the people. Adhering to the basic principle that taxation aims to promote social fairness and justice and improve people’s well-being, China strives to build a modern tax theory with Chinese characteristics and thoroughly implement the people’s nature of taxation.
The modernization of China’s tax governance is a modernization that takes into account overall efficiency and fairness and promotes common prosperity. In recent years, in tax practice, on the one hand, China’s tax policy has played an important role in helping to optimize and upgrade the economic structure, optimize the business environment, stimulate the vitality of market players, enhance the ability of scientific and technological innovation, encourage international investment and trade, promote high-quality economic development, and then make the “cake” bigger, strive for efficiency, and consolidate the material foundation of common prosperity; On the other hand, by acting on the primary distribution, redistribution and the third distribution, the tax policy regulates the income distribution gap of residents and the development gap between urban and rural areas and regions, thus cutting the “cake” well, promoting equity and helping the realization of common prosperity.
In order to deal with the digitization of economy, the construction of digital taxation is regarded as an important part of the modernization of tax administration. From the launch of the third phase of the gold tax in September 2008, to the pilot in 2013, and then to the nationwide launch in October 2016, the gold tax collection and management information system has realized the leap from a single tax to full coverage of taxes, and the national centralization of collection and management data. With the landing of the “Opinions” in March 2021, a new chapter in the construction of smart taxation has been opened. In order to achieve the triple goals of “full collection of taxes and fees, reliable and secure sharing of tax and fee data, and privacy protection of taxpayers and payers”, it is urgent to promote from the two wings of “rule of law” and “digital governance” to build a new pattern of tax governance modernization. Under the current VAT system, the connotation of “intangible assets” and “services” and other elements will be expanded, data products and digital service transactions will be included in the scope of VAT collection, and the VAT rate will be simplified, the institutional neutrality of VAT will be strengthened, and the interference and distortion of taxation on the development of the digital economy will be reduced. On this basis, drawing on international experience, value-added tax is levied on trans-regional and cross-border digital service transactions according to the principle of taxation at the place of consumption, so as to reasonably divide tax jurisdiction. In addition, the income from the transaction of digital products and digital services will be included in the scope of corporate income tax. In cross-border transactions, by modifying the criteria for the identification of permanent institutions, such as adopting rules such as “virtual permanent institutions” or “significant economic presence” to safeguard China’s tax rights and interests as a market country, and clarifying the tax obligations of multinational technology giants in China, they can declare tax on their own, or the data products and digital services by the recipient of withholding tax; In domestic transactions, tax revenues can also be distributed among municipal venues and places of incorporation. The most important is to expand the scope of personal income tax to all types of digital products and services transactions, and clarify the nature of each type of income. Data resources with monopoly will be included in the scope of resource tax collection, so as to limit the monopoly of data resources by Internet technology giants and improve the allocation efficiency of data resources.
Future development of Chinese taxation
The research on the theory of tax administration shows that the current tax system of our country is constantly improving and has gradually formed a socialist tax system with Chinese characteristics. From the perspective of development characteristics, China is still in the primary stage of socialism, so the current tax system still reflects the characteristics of national, development, reform and external involvement. From the level of tax construction system analysis, the current tax types are public tax, reform tax, national tax, development tax, foreign tax. In the new period, China’s tax collection has taken on new characteristics, reflecting the financial view under the background of “Chinese Dream” – based on tax and committed to getting out of tax. Relevant departments should study fiscal and tax related issues from the perspective of international politics, and build a comprehensive tax management system on this basis.
The tax authorities should comprehensively consider various specific situations and objective requirements in the process of tax collection, and accurately formulate tax revenue indicators based on the budget, so as to ensure that the tax revenue can fully support economic construction and people’s livelihood development, and ensure that the tax revenue is reasonable and does not cause economic pressure on enterprises and individuals. The tax authorities shall, through legal procedures, report to the relevant higher authorities for approval for reasonable adjustment of tax tasks. Through this tax management method and operation mechanism, the effective unification between tax collection and administration can be achieved, the rationality of tax collection can be improved, and the goal of comprehensively governing the country according to law can be realized.
The smooth implementation of tax collection cannot be separated from the support of the corresponding service guarantee mechanism, so the relevant departments should continuously enrich the theory of “organic unity of legal collection and management and tax payment service”, and build a systematic service guarantee and support system for tax collection. At present, in the process of building a modern tax theory system, relevant departments in our country constantly explore the establishment of a scientific and comprehensive tax collection and management system and a high-quality and convenient service system, so as to realize the unified management of various tax collection activities and constantly optimize the management of various tax contents; On the other hand, it effectively integrates tax payment service and legal collection and management service, and continuously improves the level of tax payment service based on the legal collection and management mode.
Always adhere to the dynamic development concept, combined with the development status of different development stages, establish a dynamic tax theory system, explore the construction of tax collection and legal collection and management system, based on the new budget management system, accurately construct tax collection and predictive indicators, realize the effective unification of tax tasks and legal collection and management under the concept of governing the country according to law, and improve the rationality of tax collection. It is beneficial to promote the modernization of China’s tax theory.
Conclusion
Under the background of the continuous adjustment of China’s industrial structure, how to carry out and optimize the tax work has become an important research topic. Modern archaeological discoveries have been able to completely outline the whole process from the initial wealth accumulation of primitive tribes to the generation of taxes, and activate the true components of the ancient tax origin legend, so that the origin of Chinese tax has become a recognizable historical process. The origin of tax in China has its own characteristics and development pattern: the formation of trans-regional and trans-ethnic tax system has vigorously promoted the formation and development of the diversified and integrated pattern of Chinese civilization, and built the cornerstone of a unified country; The tax value orientation of mutual assistance and mutuality is a strong support for maintaining a unified country of diversity and unity. The internal logic of fairness and rationality is the tax code of the endless growth of Chinese civilization.
The advancement of tax revenue theory modernization can provide guidance for our country economic development. With the emergence of new technologies and new sales models, in the process of improving tax theory, China should combine with new elements such as online live streaming, explore and build new tax management methods, and incorporate them into the tax theory system. Exploring the establishment of a strict tax collection and management system is conducive to the combination of tax collection and modern governance goals. The modernization of China’s tax theory is a dynamic development process, and there is no specific development model for reference. Under the development goal of building a modern socialist power, China must constantly explore the construction of a socialist tax theory system with Chinese characteristics.
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