10 Proposals for Further Deepening Reform: Fiscal and Tax Reform
Shenzhen Innovation and Development Institute (SZIDI) released the China Reform Report 2017 in May 2018. Entitled Reform on Route, this year’s report evaluates twelve major aspects of the reform process in 2017, concludes reform experiences from the past five years and makes predictions on the future trend of reform in 2018 with ten policy recommendations. The report identifies 2017 as a crucial year during which series of planning and design culminate into implementation, and historical breakthroughs and periodical progresses rise to the surface.
The Decision of the third plenary of the 18th Party Congress set three goals for fiscal and tax reform, including improving budget management system, deepening tax reform, and making adjustments to central-local fiscal relations. The past years have witnessed the release of a series of reform measures on fiscal and tax policies, notably the transition from business tax to value-added tax. Nevertheless, most of the reform measures remain adjustments at the technical level, leaving the core issues untouched. Therefore, the report suggests that the fiscal and tax reform should
l decrease the share of government revenues in the national income through
n raising personal income tax threshold
n lowering corporate income tax for small-mid size firms
n lowering value-added tax to save operation costs for firms
n dropping governmental funds and administrative taxes and fees including extra taxes that corporates have to pay for education, cultural facilities, hydraulic projects and so on
l make good use of taxation to close the gap in income inequality, for instance
n redesign the personal income tax mechanism to reflect variances in taxpayers’ professional conditions and dependency burdens
n divide real estate tax into housing property tax, land tax
n create different and sophisticated forms of taxation for different types of properties, such as house with limited property rights and farmer’s residential land
l address the widening gap between fiscal and tax structures in eastern and western provinces through adjusting central-local fiscal and tax relations
