Economic Thinking On Tax Law

　　 tax revenue For the purpose of realizing the functions of the state, based on political power and legal provisions, the compulsory implementation of the property by the government specialized agencies to residents and non residents is a kind of imposition and non direct repayment. finance The form of income. The tax law is based on a certain material basis, which is formulated by the state, approved and explained, and has the national mandatory system to ensure the implementation of the regulation of tax relations. It is the embodiment of the class will of the state's political power in the tax distribution. It is a legal form to confirm, protect and develop the tax benefits which are in favor of the state.

It can be seen that taxation is the government's intervention in state power. Economics The tax law is generated by the adjustment of its activities. Therefore, it is very necessary to recognize the necessity of the government's involvement in the economy and the important influence of the economic foundation on the establishment of the tax law system.

First, why is taxation necessary?

In his great book "the wealth of nations", Smith pointed out that private markets provide the best way to maintain economic efficiency for most of the time. Under the guidance of the invisible mechanism of market mechanism, individuals and enterprises pursuing self-interest are buying and selling transactions in the free market. Under such circumstances, all participants benefit from voluntary trading in the competitive market, maximizing the output value produced by social resources, thus achieving the efficiency of resource allocation. In modern welfare economics, the effective allocation of social resources is generally expressed by the "Pareto optimality" named by Italy economist Pareto. The so-called Pareto optimality refers to such a state: without deteriorating other people's circumstances, no one will be better off. From an economic point of view, in the process of resource reconfiguration in various uses, if we improve the welfare of one person, we should at least reduce the welfare of another person. This resource allocation is Pareto optimal allocation. Therefore, under the conditions of "laissez faire", the allocation of resources caused by the operation of the competitive market will be Pareto optimal. However, the conditions and environment required by the competitive market mechanism to achieve Pareto optimal allocation of resources hardly exist in reality. The lack of efficiency in the market mechanism can be called "market failure". It is the actual existence of market failure that makes the government's intervention have a reasonable basis. Government intervention can not only adopt administrative means, but also adopt economic and legal means. It is under the following market failures that the tax revenue adopted by the government has found its way.

First, market failure in the field of resource allocation: externality and the existence of public goods make taxation necessary. The so-called "externality" refers to a person or a manufacturer who acts directly on other people's behavior and does not need compensation or compensation. Therefore, these individuals or manufacturers are not responsible for the harmful consequences of their actions. Externalities can be regarded as an example of imperfect operation of the price system. Externalities can be negative or positive. A typical example of negative or negative externalities is pollution, where production is too high. A typical example of positive or positive externalities is patented invention, where insufficient supply will occur at this time. For these two situations, the government can make use of Taxation or tax subsidy measures to make the price reflect the cost truly and ensure the balance between supply and demand.

There is a class of goods known as "public goods", which can be regarded as the extreme situation of positive externalities. Public goods are such goods. When increasing one person's sharing, it does not lead to the increase of costs, and excluding any individual's sharing of them will cost a lot (they are non exclusive). The standard examples of public goods are national defense, and the lighthouse on the side of the road and the navigation. Anyone can enjoy the benefits that they bring. Increasing a beneficiary does not bring additional costs, and prohibiting others from benefiting is impossible or costly. The private market is insufficient for public goods, because the market mechanism excludes those who are unwilling to pay the current price to consume certain products or services. However, if there is a non exclusiveness, the seller can not ask the buyer for the price, because the latter can be freely consumed under any circumstances. This is the so-called "free ride" problem. On the other hand, it is inefficient to use market mechanism to exclude people from enjoying public goods, because more people do not increase their consumption cost, that is, the marginal cost of allowing more people to consume public goods is zero. Because of the nature of public goods, everyone believes that whether they contribute or not, they will benefit from public goods rather than pay by themselves. Because of this, private enterprises have no incentive to produce and sell such goods or services. Therefore, the market will not supply such goods or services, if supply is insignificant. Based on this fact, it is necessary for the government to make use of its special advantages of Taxation, forcing citizens to pay for public goods through taxation and benefit the whole society.

On the other hand, there is also market failure in the field of income distribution. Here, the use of the right to taxation highlights its necessity. We know that the pursuit of market mechanism is the allocation efficiency of resources without taking into account fairness. Moreover, the market mechanism requires that the income be allocated according to the size of the people's ability or contribution and the property owned by the individual, and how the income of the person without the ability to work and property is protected. Therefore, the competitive market may bring about unfair income distribution. Based on this situation, some economists put forward the concept of "Pareto's optimal income redistribution". The basic idea is that the interdependent utility function of individuals is a form of externality. It is assumed that the utility of an individual depends not only on its own consumption, but also on the consumption or income obtained by others. For good reason, for example, if the benefits of the poor increase, the rich may feel better. In this case, by transferring part of the income of the rich to others, it is possible to raise the welfare of all. However, the premise of such a theoretical assumption can only be the common values of people: a society with a smaller gap between the rich and the poor is a society that enables everyone to live a better life. It is in this ideal that it is necessary for the government to transfer payments through taxation to narrow the gap between the rich and the poor.

Two, what are the characteristics of a good tax system built on the basis of the economy? The art of Taxation has been described by analogy with how to pull goose feather and not to let the geese quack. A good tax system should include at least the following characteristics:

(1) fairness

Fairness is mainly reflected in the role played by tax in correcting the uneven distribution of the free market. It is not only the ideal pursued by human society all the time, but also the soul of the tax system under the condition of socialist market economy. However, people who have different meanings of fairness have different views in different times and different societies. The rich may say: individuals have the right to enjoy the fruits of their labor; if some people work hard or are more fortunate to be more productive, it is their fundamental right to get higher incomes. The poor will retort that a just society should do its best to improve the welfare of the worst. Robert, a famous scholar at Harvard University. North and John. Rawls supported the above two viewpoints respectively. Economists describe these impartiality through two principles. The first is horizontal equity. This means that taxpayers with the same economic or tax capacity should bear the same amount of tax. Horizontal fairness emphasizes that the tax is the same when the situation is the same, but the situation is different, indicating that the ability to pay taxes is different. If the same tax is imposed, it violates the principle of fairness in taxation. On the other hand, vertical equity. This means that people with different economic conditions or tax capacity should pay different taxes. For example, high income earners should pay more taxes than those with low incomes. A progressive tax rate is generally used to meet this requirement, and the high income earners are taxed at a higher rate.

(two) efficiency

Taxation should not only reflect the adjustment function of distribution, but also reappear the efficiency problem. Fairness and efficiency seem to be a pair of contradictions. The fairness of tax revenue helps to allocate a cake more evenly. But if it interferes with the way of economic allocation and causes too much cost to taxpayers, it will strike people's enthusiasm for work and further affect the efficiency of the whole economy and make the cake smaller. Levying taxes on one kind of behavior encourages people to engage in that kind of behavior instead of those that are less taxed. But it is presumed that their previous activities are more productive; otherwise, it is not necessary to levy taxes to engage in second activities. Therefore, taxation reduces the efficiency of resource use. If taxation can minimize this substitution effect and have no annual income loss, this inefficiency can be avoided or reduced at least. The way to maximize the efficiency of resource allocation in tax revenue is to reverse the demand elasticity of tax goods and behaviors. If the demand elasticity of food is small, a high tax rate should be imposed; and the demand for high-end consumer goods is large, so a low tax rate can be imposed. But it is obvious that this tax system violates the tax distribution function. The most obvious example is: the most efficient tax category is a "lump sum tax" (or poll tax) that is not imposed on all citizens according to the taxpayer's income or wealth status. Because a total tax payment is based on the personal tax basis, the taxpayer's tax payment has nothing to do with economic behavior, so it is absolutely neutral to the taxpayer's economic decision-making and economic behavior. In other words, the Levy of a total tax will only produce an income effect, that is, to reduce the actual income and welfare of the taxpayer, instead of producing an alternative effect, that is, it will not distort the taxpayer's economic behavior, that is to say, it will not lead the taxpayer to substitute one kind of economic behavior for another economic behavior. But it has little effect on promoting distributive justice. In view of this, when designing tax system, the government has to use other distorting taxes instead of a lump sum tax to achieve the goal of fair income.

(three) simple management

Levying taxes and managing tax systems cost the government and those who have to pay taxes. Too complicated procedures and forms will cost a lot of time and energy, and they can be used to create social wealth. The more targets pursued by the tax law, the more complicated they become. The strict tax system can make taxpayers do not have to resort to seeking loopholes in the tax law to avoid tax evasion. If the law is not rigorous enough, taxpayers will have enough incentive to spend money and time to evade taxes for greater benefits. The tax law is gradually perfected in the constant contest between the two sides of the interest. But sometimes, when a law pursues multiple goals, conflicts inevitably arise, we have to make some trade-offs to reduce its management costs.

(four) enough flexibility

As the economic environment changes, the tax rate will also change. The tax rate should take full account of the changes in the real economic situation of taxpayers, and fully reflect fairness. However, this will inevitably bring about management costs and make tax procedures complicated. However, a good tax system should be able to do this relatively easily.

(five) transparency and transparency is to make every taxpayer aware of why he really pays taxes, what benefits he gets from it, the necessity of Taxation, and whether his tax burden is reasonable. Only if every taxpayer has a "clear account" can he really set up a taxpayer awareness and make tax payment a glorious duty for every citizen, instead of merely appearing to be plundered on the surface. {page_break}

Three, the guiding ideology of tax reform in China

In 1994, China carried out a comprehensive tax reform and established a relatively complete tax system framework. But in recent years, many problems have been exposed, and there is a need for further reform and improvement. In this regard, some theories put forward by economists are worthy of our reference.

In 1996, British economist Mirrees and American economist Vickery won the Nobel prize in economics, which showed the affirmation of the "best taxation theory" put forward by western economists. The theory of optimal taxation refers to: under the premise of asymmetric information (the government does not know the taxpayers and tax objects and so on, and at the same time, the ability to collect and manage tax is limited), how can the government levy taxes to meet both the efficiency requirements and the fairness principle?

The theory of optimal taxation mainly studies three aspects. First, it is pointed out that direct tax (indirect income tax) and indirect tax (commodity tax) should complement each other rather than replace each other. Because the role of differential commodity tax in the efficiency of resource allocation is not available for income tax: (1) because income tax can not levy taxes on leisure, and leisure is actually a manifestation of personal welfare, the government can curb people's excessive consumption of leisure by levying commodity tax. (2) due to the external diseconomy of the economic activities, the government should make the private cost of all economic activities equal to the social cost through the differential commodity tax so as to better allocate the social resources. Secondly, in the most suitable commodity taxation system, when the demand for goods is independent of each other, the respective tax rates for each commodity must be inverse to the price elasticity of the commodity itself. Finally, the most suitable income tax theory requires that the optimal tax rate of income tax should be "inverted U". That is, from the overall perspective of social equity and efficiency, the marginal tax rate of middle income earners can be higher, while low income and high-income persons should apply a relatively low tax rate. The marginal tax rate applicable to individuals with the highest income should be even zero. This conclusion is based on this judgment: under the same efficiency loss, the government can increase the profit of the group by increasing the marginal tax rate of the middle-income group, and increasing the profit margin of the group by reducing the marginal tax rate of the highest and lowest income persons, so as to achieve both Pareto improvement and fair distribution of income.

At the same time, some western economists pointed out that the success of tax reform needs to be judged from three criteria: (1) to what extent the tax reform has achieved the goal set by the government. (2) sustainability of tax reform. (3) the degree of desirable or undesirable by-products arising from tax reform.

According to the best tax theory and the above standards, we need further efforts to achieve the successful tax reform in China. First of all, China should establish a truly double main mode of taxation. At present, China's turnover tax accounts for about 70% of the total tax revenue, of which more than half of the tax is added, and the proportion of income tax is too low. In the case of compound tax system with income tax and commodity tax, is income tax or commodity tax the main tax category? Generally speaking, the application of income tax achieves the goal of fair distribution, and the application of commodity tax to achieve economic efficiency. If the government's policy objectives are mainly distributive fairness, we should choose the tax system with income tax as the main tax category. If the government's policy objectives are mainly economic efficiency, we should choose the tax system with commodity tax as the main tax category. Therefore, the tax system ultimately depends on the trade-off between fairness and efficiency. We must recognize that whether efficiency is the priority to enable the national economy as a whole to achieve substantial development to enable the poor to benefit from it, or to pay more attention to the distribution of equity and to achieve a "full wealth" by losing certain efficiency. Our current Gini data show that the research has reached 0.39, and the inequality between the rich and the poor is very serious. But in the current stage of development centered on economic construction, I believe that we should still advocate "giving priority to efficiency and giving consideration to fairness", focusing on turnover tax, but at the same time paying attention to raising the proportion of income tax, so as to achieve a truly double main mode of taxation.

On the other hand, we must establish a wide tax base in China's tax reform. Excluding any real income outside the taxable area will reduce the tax base and make people more engaged in activities that do not tax income. The broadest definition of income should be all cash and non cash receipts, including not only leisure and other non cash income from household production, but also gifts, bequest and bonuses. This is mainly based on the consideration of reducing the substitution effect. Therefore, the gift must be differentiated from the gift in commercial relations (which will produce the substitution effect of economic behavior, essentially the form of remuneration for labor) and other gifts (no substitute effect, purely emotional). For the former, income should be taxed and the latter tax-free. The reason for the bonus tax is that the bonus itself has affected people's proper research project decisions and career choices, and taxation will only reduce such undesirable incentives. For leisure tax, it is also based on the same reason. If excluded, it will make people prefer to choose activities that are conducive to leisure rather than cash income - such as teachers' profession, long paid vacation is an important part of work remuneration.

Another important principle is "strict management". Professor sari, a late tax law expert, put forward specific proposals on how to strengthen tax administration in developing countries: the tax law must be strictly designed and formulated as a code; the management team must be well organized, fully provided manpower and professional training; taxpayers must be classified into books and their tax returns can be obtained the necessary audit and audit; relevant information can be obtained and utilized in a timely manner from other government departments and related units; contradictions between taxpayers and management departments can be satisfactorily resolved; violations of tax laws can be punished in accordance with the law. In view of the above suggestions, our country still has a long way to go, for example, the tax code has not yet been completed, the personal declaration system is not perfect, the tax administration department is inefficient, and so on, all of which need to be reformed and perfected.

Finally, it should be pointed out that the most appropriate taxation theory is not a panacea. These theoretical standards must be adapted to the specific conditions of the country's economy, politics, management, culture, history and so on, otherwise it will be of little use in practice. A typical example is that the theory of western economics generally believes that taxation occurs only when the market fails. The government is in a passive position and should intervene in economic activities as little as possible. However, in the modern society, the government is entering the economic life with a positive attitude, especially by leveraging tax revenue, giving play to the functions of guiding the economy, developing specific economic sectors with purpose, and adjusting the industrial structure. Some scholars call it a new function of Taxation - "developing economic functions". This is also very evident in our country.

In a word, it is an important task for us to fully absorb the advanced theories in the world and to carry out drastic reform of the existing tax system in light of China's practice.