My mom will be the expert of my inverviewe
Her name is Stephanie Wang. Her email is 953439550@qq.com
Why: my mom is older than me, she has more experience than me and she is interested in economics. In her spare time, she often reads financial news and watches videos, which has accumulated rich experience.
Thesis : Tax system ’s question and reform suggestion in China’s development strategy transformation
Introduction
After a long period of debate and exploration, in 1992, China clarified establishing a socialist market economy , and China’s economic development has entered a new stage. Before this, China’s fiscal system reform, like other reforms, was in the experimental stage of “crossing the river by feeling the stones”, and there was no clear reform goal, and various reform measures were mainly proposed for the urgent problems faced at that time.
Although this kind of system change has its advantages, it is not necessarily consistent with the requirements of the comprehensive establishment of market economy. Therefore, after the goal of China’s economic system reform was made clear in 1992, it is more urgent to establish a financial system suitable for market economy. In response to the acceleration of reforms in other areas, the reform of the fiscal system began to enter a stage with the reform of the tax sharing system as the core.
The theory and policy discussion of tax sharing reform began as early as the mid-1980s. In 1986, there was an idea of excessive tax reform, but it could not be implemented because the planned economy was still in the dominant position, the market mechanism was not fully developed, and the market environment necessary for the implementation of tax sharing was lacking.
Hierarchical financial system
Since China’s reform and development entered a new stage in 1992, the goal of the reform of the financial system has been clearly to implement a hierarchical financial system based on the tax sharing system (Wong, 2000), and from 1992 to 1993, pilot tax sharing systems have been carried out in Liaoning, Zhejiang, Xinjiang, Tianjin, Chongqing, Wuhan, Shenyang, Dalian, Qingdao and other places.
In 1993, the Chinese economy overheated and the shortcomings of the original fiscal system were exposed again, which prompted the central government to make up its mind to carry out the reform of tax sharing system on the whole country. In 1994, fiscal system reforming with the tax sharing system as the core was implemented nationwide (Fang, et al., 2022). There are many defects in the implementation process of the tax sharing reform, and some of the original envisaged reform goals have not been well achieved, which has led to some criticism, and some people even think that the tax sharing reform is a failure and should not have this reform. What is the actual situation?
Tax sharing system is a common system arrangement for market economy countries to deal with the financial relations which is conducive to correctly dealing with the financial distribution relationship between the central and local governments. The reasons for the problems in the implementation of China’s tax sharing system are different.
The reform of the tax sharing system was dependent on the central finance’s determination of the amount of tax rebates to local governments in 1993 as the base year, resulting in the extraordinary growth of local government revenue in the second half of 1993, and the central finance’s determination of the amount of tax rebates to local governments was unreasonable, so that the reform of the tax sharing system was intended to increase the relative financial resources of the central government (Loo, & Chow, 2006). The goal of adjusting the allocation of financial resources among regions has not been well achieved. This is indeed a major flaw in the 1994 tax-sharing reform. However, as a result, the tax sharing reform will weaken the financial power of local governments, and it will be very difficult to implement it smoothly if the vested interests of local governments are not properly accommodated. Moreover, the conditions required for the implementation of the new system cannot be fully satisfied in a short period of time, and there needs to be a transition between the old and new systems, otherwise it will inevitably lead to difficulties in connecting the old and new systems and great confusion.
Central government revenue
Of course, from the perspective of long-term development, this method of determining inter-governmental transfer payments and financial division is very unscientific, and it is difficult to achieve the goal of reasonable adjustment of financial distribution.The allocation of financial resources between governments should gradually be changed from the current “base law” to the “factor law”, and the allocation of financial resources and transfer payments between the central and local governments should be determined according to the actual responsibilities and revenue capacity of governments at all levels. Of course, the prerequisite is to realize the transformation of government functions and public finance of the financial system, and the central government and local governments should correctly divide their respective responsibilities according to the coverage of public goods externalities. The practice in the past few years shows that the reform of tax sharing system has not solved the problem of small scale of national fiscal revenue and financial difficulties of the government.
After 1994, the proportion of the central government’s fiscal revenue in the national revenue increased significantly, from 28.12 percent to 55.7 percent in 1994, and then dropped slightly to 50.96 percent in 1999, basically reversing the decline in the relative financial resources of the central government since the beginning of reform and opening up. This is a remarkable achievement of the tax-sharing reform.
However, the proportion of total national budget revenue to GDP did not show a significant upward trend. In 1994 and 1995, the proportion of total national budget revenue to GDP was 11.2% and 110.7% respectively, maintaining a downward trend. After 1996, it picked up slightly and rose to 13.87% in 1999. The goal of the tax-sharing reform is to increase the two proportions of fiscal revenue, and the goal of the reform of the public finance of the fiscal system requires a substantial increase in these two proportions (Chen, et al., 2023). At present, only the government’s fiscal revenue of total fiscal revenue has increased significantly, and the proportion of national fiscal revenue in GDP has not shown a significant upward trend, which seems to be contrary to the original intention of the reform. However, this is not surprising considering that the reform of the tax sharing system has just begun, and the fiscal system is still in the stage of replacing the old and the new.
In the new tax system, the turnover tax system tax like value-added tax, consumping tax and corporate tax occupies the main position, of which value-added tax is the most important, consumption tax and business tax are only supplementary. However, the implementation of value-added tax technical requirements are relatively high, especially for the invoice management system and the quality of tax collectors is relatively high, if there is no corresponding supporting measures, there will be more serious tax evasion and tax fraud problems.
Reform of tax sharing system
Since the introduction of value-added tax in 1984, there have been these problems, and after the tax reform in 1994, this problem has not been solved. Therefore, the value-added tax as the main tax has attracted a lot of criticism. However, on the other hand, if we do not use value-added tax as the main tax, we should imitate the United States, as some people advocate.
The implementation of the tax system with income tax as the main body will certainly reduce the requirements for tax collection and management? In fact, the implementation of the tax system based on income tax, its collection and management difficulty in China is no less than value-added tax (Wang, et al., 2022). The collection of income tax requires the income of enterprises and households. An accurate understanding of the situation is difficult to achieve in China’s current stage of socio-economic development. China’s financial system is underdeveloped, the disclosure of corporate financial and accounting information is not standardized enough, the transparency is very low, no matter the income of enterprises or residents, the tax authorities are faced with a serious problem of information asymmetry, and the tax cost of collecting income tax is high.
For a long time, China’s fiscal revenue mainly relies on the enterprise revenue provided by state-owned enterprises, and the main basis for income collection is the subordination relationship of enterprises. The corresponding tax collection and administration is relatively simple, which is quite different from the tax collection and administration system in public finance. As long as we decide to establish a fiscal system compatible with the market economy and realize the public finance of the fiscal system, we need to realize the modernization of tax collection and administration and improve the efficiency of tax agencies, whether it is based on income tax or value-added tax. Therefore, the main tax status of VAT should not be denied because of the difficulties of tax audit and tax evasion in VAT collection and administration.
As for the VAT is currently production-oriented, which is not conducive to stimulating fixed asset investment, mainly because the VAT collection and management system is not perfect, there are still some technical difficulties in deducting the purchase cost of fixed assets from the sales income of enterprises, and this problem can be automatically solved after the new tax system is perfected. Although the reform of the tax sharing system has taken care of local vested interests (Jiang, et al., 2022), standardized tax sharing system and the emphasis on the central government’s financial power have imposed great constraints on local vested interests. Therefore, there are strong opinions from local governments and enterprises during the implementation process, especially the cancellation of some tax incentives that have been implemented for a long time. Limit arbitrary local tax cuts and exemptions. The reform of the tax sharing system is a denial of the past fiscal system that divided the food and expenditure, and the responsibility of fiscal expenditure and revenue may not be equal, so it is considered by some people that it is not conducive to mobilizing the enthusiasm of local governments to develop the economy and collect fiscal revenue, and is not conducive to improving fiscal efficiency. This is a misunderstanding of public finances.
Future development
The continuous reform of the budget management system of the central and local fiscal and tax relations has established the concept of public finance and related basic systems. But there is still a long way to go.
In 2018, China’s central government revenue accounted for 46.6% of the total. This is the standard of general public budgets. If we adopt a double budget approach and add government-managed funds and social security funds, the proportion will further decline. In market economy countries, the total income of the central government is generally more than 60%. From the perspective of international comparison, the proportion of central fiscal revenue in China is seriously low, and there is a lack of local taxes. After the introduction of real estate tax, if the income distribution of other taxes is not adjusted, the proportion of central fiscal revenue will decline. The most important reason for the high proportion of land transfer revenue in local fiscal revenue is the dualization of the urban and rural land system, which is caused by the special land transfer system, which has seriously distorted the allocation of land resources and jeopardized social fairness and justice, and should be the focus of the next reform.
Although the tax sharing system has brought a series of advantages, it has also exposed shortcomings and problems. First of all, local governments are still facing strong financial pressure, including debt risks, insufficient revenue and other problems. Secondly, the distribution of resources is still unbalanced, resulting in the overall development level of financial system construction needs to be improved. Therefore, the tax sharing reform must be further developed, strengthen policy coordination, and promote a more reasonable allocation of financial resources.
In order to solve the problems and deficiencies of tax sharing system, it is necessary to reconstruct financial management. On the one hand, it is necessary to establish a sound policy market and management mechanism to ensure the fair, fair and open use of financial resources. On the other hand, it is necessary to strictly implement financial regulations and policies to promote the refinement and standardization of financial management. Through these measures, we will ensure that the tax sharing system plays its normal role and comprehensively deepen fiscal reform.
In the reform of tax sharing system, to promote innovation mechanism and establish modern financial system in line with the requirements of market economy, on the one hand, we need to reduce administrative intervention, grasp the law of market economy, and effectively promote the transformation of government functions. On the other hand, it is necessary to adapt to the challenges of international fiscal and tax competition, clarify the management functions and legal responsibilities of the central and local governments, establish a complete financial Treasury and credit evaluation system, and realize the modernization of public financial services.
Reference
Wong, C. P. (2000). Central-local relations revisited the 1994 tax-sharing reform and public expenditure management in China. China Perspectives, 52-63.
Fang, H., Su, Y., & Lu, W. (2022). Tax incentive and corporate financial performance: Evidence from income tax revenue sharing reform in China. Journal of Asian Economics, 81, 101505.
Loo, B. P., & Chow, S. Y. (2006). China’s 1994 tax-sharing reforms: one system, differential impact. Asian survey, 46(2), 215-237.
Fang, H., Su, Y., & Lu, W. (2022). Tax incentive and firm investment: Evidence from the Income Tax Revenue Sharing Reform in China. Accounting & Finance, 62(5), 4849-4884.
Chen, Z., Xiao, Y., & Jiang, K. (2023). The impact of tax reform on firms’ digitalization in China. Technological Forecasting and Social Change, 187, 122196.
Wang, J., Liao, X., & Yu, Y. (2022). The examination of resource tax reform facilitating firms’ green innovation in resource-related industry in China. Resources Policy, 79, 102980.
Jiang, W., Li, X., Liu, R., & Song, Y. (2022). Local fiscal pressure, policy distortion and energy efficiency: Micro-evidence from a quasi-natural experiment in China. Energy, 254, 124287.
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Influence on Academic Action Steps Online:
I interview my mom, Stephanie Wang through email.
Here are some insights form experts for the interview questions !
1. “Pigou’s wealth effect states that consumers are richer at lower price levels (assuming constant wages). Therefore, I believe that when the price level of an economy falls (or deflation occurs), the real value of money and monetary assets (such as savings) increases. This makes consumers feel richer, even if their money doesn’t change in nominal terms. When consumers feel wealthier, they spend more. Increased spending helps to increase overall demand. When the price level goes down, demand goes up and the demand curve goes down.”
2. “ There are five main factors, which are: Decline in the overall price level, Future price reduction expectations, interest rates caused by changes in the price level, Changes in foreign price levels compared with domestic price levels. A weak domestic currency makes exports more competitive and imports more expensive, thereby increasing net exports and causing a movement down the aggregate demand curve.”
3. “I think the main thing is increased consumer confidence, followed by expansionary fiscal policies such as government spending, tax cuts, and expansionary monetary policies (such as when a central bank like the Federal Reserve increases the money supply or lowers interest rates, borrowing becomes cheaper). Finally, foreign exchange earnings increased. When foreign economies are better, incomes rise, demand rises, causing our exports to rise, causing our demand curve to turn right.”
4. “The long-run aggregate supply (LRAS) curve shifts outwards (to the right) mainly due to an increase in human capital, an increase in the working population, institutional and structural reforms, natural resources, and organizational improvements. The LRAS curve is a vertical line at the level of full-employment output because it assumes that an economy’s long-run output potential is determined by the number of workers in the economy, and when an economy is at full employment, all resources (such as labor and capital) are used most efficiently, meaning that the economy’s long-run productive capacity remains the same. So the LRAS curve is vertical.”
5. “When financial markets are efficient, market prices change rapidly as information changes. Efficient markets are forward-looking. If market participants believe the slowdown is temporary, they will take advantage of lower prices during the slowdown to invest. This proactive behavior can prevent a significant decline in AD, and on the contrary, it can speed up the recovery process.”
6. “‘Animal spirits’ refers to the fact that people’s spirits and emotions can affect the economy. When business is more optimistic, people are more willing to invest, expand production, open new plants, invest in new technology, and hire more people. These investments originated in finance. When people are optimistic, they are more inclined to consume, generating more demand.”
7. “I believe the AD curve may shift to the right due to increased optimism leading to higher consumption and investment.”
8. “If the Federal Reserve raises interest rates significantly, it is likely that the deposit interest rates paid by the public will also increase, although the exact magnitude of the increase would depend on various factors. Simultaneously, the value of existing US Treasury bonds held by the masses would typically decrease as interest rates rise, inversely affecting bond prices.”
9. “When many users start withdrawing money at the same time, a run on the bank occurs. Judging from the current bank asset structure, the sum of deposit reserves and long-term Treasury bonds is much smaller than the number of deposits, so when a run occurs, the bank may go bankrupt because it cannot meet the withdrawal requirements.”
10. “If households in the economy decide to withdraw money from their checking account deposits and hold it as currency, there could be a short-term decrease in the overall money supply in the banking system. This might lead to reduced lending capacity for banks, potentially slowing down economic activity temporarily. Central banks might respond by injecting liquidity into the system to stabilize the money supply and support lending. Means: not change M1 and not change M2”
Beth Black, as an undergraduate engagement librarian and associate professor at Ohio State University, works to help undergraduates understand how libraries can support their success by integrating library information and resources into a variety of student experiences.
Here, I will present what I learned from the lecture and my reflections.
Library is a treasure house of knowledge, it has a vast sea of documents, all kinds of valuable knowledge, information contained in it. According to the needs of school teaching and scientific research, it collects, organizes and saves the most complete and systematic literature resources. As the “second classroom” of college students’ professional education, university library can not only provide inspiration and help for students with learning difficulties, but also provide a broad space for the full development of students with ability, which is an indispensable supplement to the classroom teaching in colleges and universities. In addition, as the “second classroom” of college students’ professional education, another function of library is to update knowledge.
Through Beth Black’s lecture, I became fully aware of how I could use library resources, such as the excellent online resources that libraries subscribe to, and the many free online resources that publishers offer. It is important for individuals to understand the layout and resources of the library before starting to utilize them. Being familiar with the various areas of the library, the classification and marking system of the shelves, and the types of resources available for borrowing can help us find the books and materials we need more quickly.
In addition, many libraries host a variety of activities and training, such as lectures, seminars, book clubs, etc. Participating in these activities allows you to communicate with others, share learning experiences, and acquire new knowledge and skills.
Using library resources can help us expand our knowledge, delve deeper into topics of interest, and enhance our professional development. Familiarizing yourself with the layout and resources of the library, developing learning goals and plans, using catalogues and databases, borrowing books and other resources, attending events and training, exploring digital resources, enlisting the help of librarians, developing reading plans and notes, participating in academic research and projects, and maintaining good borrowing and returning habits are all ways to make better use of library resources.
By making proper use of library resources, we can learn and improve ourselves more effectively.
Topic:
Macroeconomics – Money and banking
explain: Money and banking is the foundation of modern macroeconomics, and the function of banks to create money disappeared as money went from the original debt record to physical money, paper money and then back to the original.
The principle of money and banking is an important part of modern economics. By studying the essence and function of money, money supply and demand, money market, banks and financial system, we can better understand the role and influence of money and banks in the economy.
To explore this topic further, I will use phone, email and network video call interviews with several experts in the field of economics!
I choose my mom Stephania Wang as my interview expert.
Here are the questions I’m going to cover, and I’ll be back in 3 weeks to answer these questions with principles, issues, etc.
Question：
Basic issues/controversies: One biggest question is Compliance
General context of problem:when some extra big banks or company fall into trouble, people will not know it due to Consider the economic uncertainty caused by fear after the collapse. 2022 April FDIC reported that the bank number went down by 2, however the asset management went down by 120 billion.
major resources:America Banker assistance and help to connect experts
general context of problem spaces:
These topics fall within the scope of macroeconomics and focus on concepts such as wealth effects, aggregate demand and aggregate supply curves, long-run aggregate supply, market efficiency, the impact of optimism on investment, Federal Reserve policy, the public deposit rate, and the potential impact of financial decisions on banks and the broader economy. These questions explore the complex dynamics of economic theory, policy, and behavior in a variety of contexts.
**Ps: https://en.wikipedia.org/wiki/History_of_banking#Major_events_in_the_ history_of_banking
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