Do you need tax cuts now? The party media said it might consider "increasing taxes"

To solve the current double contradiction between the local government's "disorderly charges" and "local debts", it may be worth considering "increasing taxes." However, the "increased tax" here is not to blindly increase the tax rate of existing taxes, not to increase the burden on enterprises, but to implement "structural tax adjustment."
"People's Daily" recently reported that although the central government has introduced a number of measures to simplify administration and decentralization, and to implement universal fee reductions, in some local fiscal revenues, non-tax revenues have increased substantially and remain high. This not only worsens the quality of fiscal revenue, but also imposes a heavy burden on enterprises. "The tax is not enough, the fee comes together." The proportion of non-tax in public finance income rises, and the burden on enterprises increases.
Under the constant pressure of local debt, local governments have intrinsic motivation to make up for non-tax revenues and even arbitrary charges in order to make up for the fiscal deficit. Therefore, simply combating arbitrary charges is actually not a bottom-up. In order to solve these problems fundamentally, it is still necessary to consider them from the overall financial point of view.
The higher the level of social civilization, the higher the tax, the more developed the society, and the more detailed the market division. The more public services and public goods the government needs to provide, the more tax revenues are needed. China is in the process of transitioning from an agricultural society to a comprehensive urban society. In the period of time, the government’s spending on urban construction and social security will only increase, and it will be difficult to reduce it. Since China has previously had land transfer fees to make up for the government's financial shortfall, the low tax issue has not been exposed, but with the reduction of land transfer fees, the problem of insufficient tax revenue will be exposed more and more seriously. In fact, China is originally a low-tax country. The IMF World Economic Outlook has previously published data on the ratio of general government revenue to GDP in IMF member countries. China ranks 146th among 188 IMF member countries and belongs to low-tax countries.
The taxation framework adopted by countries all over the world is basically established during the Great Depression of the last century. Later, the so-called “increased taxation” and “tax reduction” are all regulating the tax rate without changing the framework. However, if only the regulation is now The tax rate is completely unsolvable.
Therefore, to solve the current double contradiction between the local government's "disorderly charges" and "local debts", it may be worth considering "increasing taxes." Of course, the "increased tax" here is not to blindly increase the tax rate of existing taxes, not to increase the burden on enterprises, but to implement "structural tax adjustment."
First, you can increase the tax on luxury products and reduce the tax on survival necessities. China should set different standards according to different industries and different products. For example, various products can be divided into three categories: “survival necessities”, “enjoyment products” and “luxury products” to improve the enjoyment products and luxury goods. Taxation, reducing the tax on survival necessities, and even modest tax cuts and tax exemptions.
Secondly, it can increase the tax on mature industrial products and reduce the tax on high-tech products. For example, industrial products can be divided into mature industrial products and new technology products. For mature industrial products, tax revenue can be appropriately increased, because mature industrial products require very little investment in research and development, only production costs, while new technology products require continuous research and development. Investing, and facing global technology competition, can reduce taxes and encourage innovation.
Third, it can increase the tax on machine-intensive products and reduce the tax on labor-intensive products. For products, we can also be divided into machine-intensive products and labor-intensive products, labor-intensive products can be appropriately tax-deductible, and machine-intensive products can be appropriately taxed, because for those products that have achieved mechanized large-scale production, labor productivity It has become very high, and the price has become very cheap. Even if the taxation standard is moderately increased, the price can be tolerated, and for industries that require more manual labor, taxes can be reduced, such as low-end food and beverage and hairdressing.
Fourth, taxes can be divided into public taxes and special taxes. Increase the proportion of special taxes and reduce the burden of public taxation. If you can solve the problem with special taxes and fees, you should not use public taxation. The special services provided by the government can be properly charged to balance the wages of civil servants. The government will build in specific areas. It can also be balanced by special taxes, which can reduce the burden of public taxation, thereby reducing the tax burden on businesses and individuals.
China has become a middle-income country, and the tax-to-GDP ratio should reach about 40%, so that the government will have enough financial resources to solve social problems, and people will not object to the benefits of high taxes, such as taxation. The highest in Northern Europe, almost no one is against taxation.
Gao Liankui (Economist, Head of China and World Economic Governance Research Project, Renmin University of China)

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