Download Research on Reasonable Criteria of China Macro Tax Burden

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Research on Reasonable Criteria of China Macro Tax Burden
YIN Shouxiang
School of Economy, Shandong Institute of Business and Technology, Yantai, Shandong, 264005
[email protected]
Abstract: The macro tax burden is the core content of the nation fiscal policy, and it is also closely
related to the nation's economic growth and social stability. There are a number of factors should be
considered when studying the reasonable tax level, we mainly focus on the two factors: economic
growth and the public service. The empirical result shows that the relationship between our macro tax
burden with economic growth is against with Keynesian theory for they are positively related with the
improvement of the macro tax burden, our economy is growing rapidly that testifies Our macro tax
burden level is not high. But our current fiscal revenue used for education, health care and for social
security aspects is lack, the taxpayers pay taxes but not enjoy corresponding public products and
services, and this is the basic reasons why the public feel the tax burden so heavy.
Keywords: Macro tax burden, Rationalization, Economic growth, Public service
1 Introduction
In China, the macro tax burden is an old topic, several scholars studied this question in 1990s.Since the
2003, Forbes list published "tax pain index" ranked China the third in the world , the macro tax burden
problem again caused the government, scholars and people's attention. Because the researchers use
different research caliber and the inconsistent standpoint and different perspective, the problem of tax
burden high or low is inconsistent. In order to comprehend the macro tax burden on our reasonable level
more deeply, the author here studies the problem from two angles: the first angle is the macro tax
burden and economic growth, and the second angle is the relation between macro tax burden with
China's public service provided.
2 Our Analysis of the Status of the Macro Tax Burden
Tax burden is the core problem in taxation policy and system. On one hand, it affects the ability of
countries concentrating how much money and the macro-control; on the other hand it also influences the
tax burden level of the enterprise and residents. The macro tax burden refers to a country's overall tax
burden level, international generally reflect it by the tax amount to the proportion of GDP of certain
period. The government income form in our country is not standard, so government revenue sources in
addition to tax revenue outside still have non-taxable income, non-budgetary income as well as outside
system income. This income does not include in the budget system partly, and even not the financial
disposal, but is the true burden for the taxpayers. At present the comparatively approved macro tax
burden caliber in domestic have 3: One is the tax revenue/GDP, called small-bore macro tax burden, two
is the fiscal revenue/GDP, called the medium caliber, and three is government revenue/GDP, called big
caliber macro tax burden. China’s current situation macro tax burden as follows:
2.1 Tax revenue growth exceeds that of GDP
Year
2001
Table 1 GDP growth, tax revenue growth and tax growth elasticity 2001~2009
Total revenue
Tax revenue
GDP (billion yuan)
GDP growth
Tax growth
(billion yuan)
growth
elasticity
15301.38
21.62%
109655.17
281
8.30%
2.605
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2002
17636.45
15.26%
120332.69
9.08%
1.681
2003
20017.31
13.50%
135822.76
10.03%
1.346
2004
24165.68
20.72%
159878.34
10.09%
2.054
2005
28778.54
19.09%
184937.37
11.31%
1.688
2006
34804.35
20.94%
216314.43
12.68%
1.651
2007
45621.97
31.08%
265810.31
14.16%
2.195
2008
54223.79
18.85%
314045.43
9.63%
1.958
2009
59521.59
9.77%
340506.87
9.11%
1.072
Note: The total GDP and taxation are all valuated by present price statistics.
Source: "China statistical yearbook", the gross tax income does not include import VAT and consumption tax from
imported products.
35.00%
30.00%
25.00%
ht
wo 20.00%
rG 15.00%
10.00%
5.00%
0.00%
2001
2002
2003
2004
2005
Year
Tax revenue growth
2006
2007
2008
2009
GDP growth
Figure 1 Tax revenue growth and GDP growth 2001-2009
To investigate tax revenue growth speed, we can work at it from two perspectives. One is the historical
probe of the tax revenues growth rate itself, and another is the compare of tax revenue growth and GDP
growth rate.
To examine the tax burden current situation, and look from the absolute value, Our tax revenue grew by
nearly three times just nine years time from 2001 to 2009, grew from 15301.38 billion Yuan in 2001 to
59521.59 billion Yuan in 2009.From the relative amounts on look, according to the simple available
calculation through table 1, the average growth rate of tax revenues is 18.98%, and the highest annual
growth reaches 31.08% from 2001 to 2009 with a surprising growth. But the average GDP growth is
10.49% and it lessens eight percent than the growth of tax revenues. It can be say that in our country, the
growth of tax revenue is super than the economic growth.
2.2 Tax elasticity coefficient is too big
Tax elasticity essentially says the coordination problems of tax revenue growth and economic growth, it
refers to the ration of tax revenue growth and economic growth. The formula is: tax elasticity coefficient
= tax revenue growth/GDP growth rate. Tax elasticity coefficient calculation results have three: more
than 1, less than 1 or equal to 1.It shows the three scenarios that tax revenue is growing at a faster or less
or equal rate than the GDP growth.
According to international practice, our tax elastic coefficient shall be less than 1 by estimate method in
normal. Because our country takes the commodity tax as the main body of the tax structure primarily,
the tax basis is the proportional rate by taking the commodity circulation as tax amount, commodity tax
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revenue increases synchronously or no more than GDP theoretically, therefore taxes elastic coefficient
only is less than or equal to 1.Considering the reality, the government needs to ensure the steady growth
in revenue and meet the needs of government spending, tax elastic coefficient should keep equal to or
greater than 1 level. It can be seen from table 1 that tax revenues grew faster than GDP growth from
2001 to 2009 in fact, tax elasticity coefficient is far greater than 1, the highest is 2.605, that further
corroborates the situation that the tax growth is super than economic growth.
2.3 Non-taxable income revenue proportion is higher
Through the table 1 and table 2 data, we can see that except a lot of tax our current government
collected and the tax average growth is18.98%,there still are a large amount of non-taxable income and
non-budgetary income, and the amount of the system income outside without specific data. It also
proves some scholars (Antifu, 2006) view that China's current small-bore macro tax burden is not high,
but the tax burden is heavy from the medium caliber and large diameter.
Table 2 Non-taxable income and non-budgetary income
Year
Fiscal
revenue
Tax
revenue
Non-taxable
income
Non-budgetary
income
Non-taxable and
non-budgetary income total
2001
16386.04
15301.38
1084.66
4300
5384.66
2002
18903.64
17636.45
1267.19
4479
5746.19
2003
21715.25
20017.31
1697.94
4566.8
6264.74
2004
26396.47
24165.68
2230.79
4699.18
6929.97
2005
31649.29
28778.54
2870.75
5544.16
8414.91
2006
38760.2
34804.35
3955.85
6407.88
10363.73
2007
51321.78
45621.97
5699.81
6820.321
12520.13
2008
61330.35
54223.79
7106.56
6617.25
13723.81
2009
68518.3
59521.59
8996.71
——
8996.71
Note: Fiscal revenue and total revenue on the basis of all press present price statistics, 2009 Non-budgetary
income data losses.
Data sources: The China statistical yearbook of 2010.
3 One of the Judgment Standards of Macro Tax Burden Rationality -- Economic
Growth
There are many reasonable standards to judge a national macro tax burden level, one of the standards is
to see whether it adapts to economic growth. The traditional Keynesian view is that the effect of taxes
on output multiplier is negative, the role of taxes on economy is in the opposite direction, that means tax
hinders the economic development. Supply economist assumes that tax rate in certain limits can
promote economic growth, but once more than this range, tax revenue and economic growth down with
the tax rate rising, this is the famous Laffer curve revealed connotation.
But there are also some conclusions that tax has little or no influence on economic with different data.
For instance, Mendoza1 has studied 18 OECD countries found out that the influence of tax on economic
growth was not significant or very weak. An economic professor Joei Slemrod at the University of
Michigan in the United States also studied that there is no convincing data to suggest that higher tax
1
Mendoza Enrique G,Razin Assaf. Effective Tax Rate in Macroeconomics: Cross-country Estimates of Tax Rate on
Factor Income and Consumption[J].Journal of Monetray Economics,1994(December):297-323.
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impacts the economy until now etc2.
Here T represents small-bore macro tax burden, Y shows GDP (taking 1978 as the practical
base).Establish economic model lnY=a+blnT. According to our country actual GDP and nominal macro
tax burden 10 years from 2000 to 2009, we apply SPSS software for OLS regression.
Year
Table 3 2000 -2009 GDP and macro tax burden
GDP index
Nominal
GDP
Actual
1978=10
GDP
deflator
GDP
0
（
）
Units: (billion Yuan)
Small-bore
Total tax
lnGDP
tax burden
income
T(%)
12582
10.229
12.6811
lnT
2000
99214.6
759.95
3.582
27702
2001
109655
823.02
3.655
30001
15301
10.309
13.9541
2.63577
2002
120333
897.77
3.677
32726
17636
10.396
14.6564
2.68488
2003
135823
987.78
3.772
36007
20017
10.491
14.7378
2.69042
2004
159878
1087.4
4.033
39638
24166
10.588
15.115
2.71569
2005
184937
1210.4
4.192
44121
28779
10.695
15.5612
2.74478
2006
216314
1363.8
4.351
49714
34804
10.814
16.0897
2.77818
2007
265810
1557
4.684
56755
45622
10.946
17.1634
2.84278
2008
314045
1707
5.047
62223
54224
11.038
17.2662
2.84875
2009
340507
1862.5
5.015
67893
59522
11.126
Data sources: according to the “China statistical yearbook” data obtained by calculation.
17.4803
2.86107
Figure 2 Scatter plot chart of lnGDP and lnT
Results: lnY=2.596+2.950lnT
(0.711) (0.260)
R2=0.942 S e=0.08013 F=128.925
The figures in brackets are standard error of corresponding parameters.
2
（）
Jiaochangfeng, The real relationship of tax and economic growth [J], Social observation, 2004 2
284
2.54011
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Judging from the regression results, the significant level of small-bore macro tax burden is low,
r-squared figures is high and goodness-of-fit is better. The results show that our current small-bore
macro tax burden and economic growth clash with the Keynesian view, the macro tax burden and
economic growth are not reverse direction change relationship. Rising macro tax burden corresponds to
China's economic growth accelerating; it is a positive correlation between them. It also shows that our
current macro tax burden level is appropriate, and in the Laffer curve reasonable rate interval. With the
improvement of tax rate, tax revenue and economy gradually grow. Here, we need to pay attention to the
accuracy of the system outside data; the macro tax burden takes the small caliber as the tax burden.
Therefore, this model also has the big defects and still need to try to improve later.
4 Another Macro Tax Burden Rationality Judgment Standard -- Public Service
Macro tax burden reflects the reasonable degree of the government department distributes the national
income. Public economics regards tax as the public product price of a citizen buying government
provision; citizens exchange for the government provides public products, public service and public
welfare by assigning their own interests. The macro tax burden is high or low, not only should consider
the tax burden to taxpayers, the government itself how much tax levy, but also fully consider how much
the government returns to the taxpayers, how much of the tax revenue truly is “taken from citizen and
used in citizen”. Judging macro tax burden level needs to investigate whether the government income
has made the national welfare increase.
Many European countries’ tax burden is high than China, but taxpayers all enjoy the government high
quality public product from birth to grave, can say that Europe is high taxes and high welfare. From our
present situation, the higher macro tax burden level does not bring the high quality public products,
instead that the macro tax burden level and the supply of public service level exist some asymmetry, our
country public products and services provide deficiently at present.
Our financial expenditure is inadequate and some of the people's livelihood support is weak. The
people's livelihood includes education, health, social security, employment and housing etc, here three
elements are analyzed.
For the education attribute namely education exactly belongs to the public product or private product,
the present science has not reach identical. Although education especially higher education does not
possess complete competition and excludability, there's no doubt that education has the positive
externality, this is the fact that does not dispute. As the public welfare undertaking, the purpose of
education is not profit, but improving the quality of people in an all-round way which creates the most
basic conditions for the sustainable development of society. Therefore, education belongs to the public
service provision range. Similarly, public health and social security also belong to the government
provide service and subsidies.
4.1 The financial education spending is inadequate
Year
Table 4 Education spending in table
Education spending accounts
Education spending (billion
for the proportion of the total
yuan)
financial expenditure
Education
spending of
GDP
2002
2644.98
11.99%
2.20%
2003
2937.34
11.92%
2.16%
2004
3365.94
11.82%
2.11%
2005
3974.83
11.72%
2.15%
2006
4780.41
11.83%
2.21%
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2007
7122.32
14.31%
2.68%
2008
9010.21
14.40%
2.87%
2009
10437.54
13.68%
3.07%
Source: Obtained according to the web of national statistics bureau. http://www.stats.gov.cn/tjsj/ndsj/
Education spending in the proportion of the total financial expenditure experiences a process from high
to low then rise again 2002 ~ 2009, the lowest education spending in the proportion of the total financial
expenditure drop to 11.72% in 2005.The level has the very big disparity with the world average,
comparing with developing countries (Korea for 20.5% in 1997, Thailand for 22.44% in 2000) locates in
low level3. Our education expenditure of GDP is the highest 3.07% in 2009, “The long-term plan of
national education reform and development (2010-2020) "proposes to improve the nation's fiscal
education expenditure of GDP and reach to 4% in 2012, but our country's education financial investment
well below the expected level of 4% at present.
4.2 Finance to the health investment is not enough
Year
2002
Table 5 China's medical health spending
Health spending accounts for the
Health spending (billion
proportion of the total financial
yuan)
expenditure
635.04
2.880%
Health spending
of GDP
0.528%
2003
778.05
3.156%
0.573%
2004
854.64
3.000%
0.535%
2005
1036.81
3.056%
0.561%
2006
1320.23
3.266%
0.610%
2007
1989.96
3.997%
0.749%
2008
2757.04
4.405%
0.878%
2009
3994.19
5.235%
1.173%
Source: Obtained according to the web of national statistics bureau. http://www.stats.gov.cn/tjsj/ndsj/
We can see through the above table that the absolute number or relative fiscal expenditure of China's
public health cost have been trend to rise gradually, it accounts for the proportion of the total financial
expenditure rises from 2.88% to 5.235%, the proportion of GDP by 0.528% rises to 1.173% from 2002
to 2009.But our country finance to the health investment is insufficient overall, the proportion of the
total financial expenditure of health spending is lower than developing country’s, for instance Egypt is
3.31% in 1997 and Mexico is 4.22% in 1999.This data is far less than the developed countries at the
same time (this data, the United States 20.5% in 2000, Germany for 18.89% in 1998).
4.3 Social security system is not sound
Social security as a social safety net can ensure the residents basic life, medical and unemployment. The
social security system is concerned with all the people's interests and the rights of the citizen, as one of
the main issues and execution it should be focused on by the government. After years of development,
the social security system of China has made some achievements. Social security system of rural social
is basic sound but it is still in the stage of development at urban, the reform task is still very difficult in a
manner of speaking.
3
TianXiamei, Reasonable level discussion on macro tax burden[J], modern trade industry, 2010 (8)
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The development of the social security system adapts to a certain phase of economic development, we
shall establish the security system which adapts to the level of economic development of urban and rural
social. To establish minimum life guarantee system in the conditional rural areas; concern on the
endowment and doctor of the vulnerable groups and special groups; handle the relation of “Protect
serious illness” and “protect the ailment "in the new rural cooperative medical, determine the direction
of development of rural social security as soon as possible and take some incentive measures to increase
farmers' income.
5 Conclusion
In the backdrop of China's current resident income growth rate is well below economic growth and
revenue growth, the House price and good price are high, not compulsory education fees raise yearly
and every social security system is not yet perfect. The public should not only take taxes but also bear
the fees; meanwhile they do not enjoy the corresponding public services and welfare level, which is the
real cause of the public feeling of heavy tax burden.
References
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press, July 2009 first edition(in Chinese)
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，
287
， （）