Taxation in the People's Republic of China

By Jinyan Li | Go to book overview

8
Evaluation of the Current Tax System and Prospects for Future Reform

The past ten years have witnessed a dramatic move in China from a strict centrally planned economy to a socialist market economy, and a transformation of the tax system from a simply structured administrative vehicle to a fairly comprehensive structure possessing many of the features commonly found in Western systems. Although further major changes and reforms can certainly be expected, the basic structure of the system now seems to be complete. Because China is different from the Western countries in that it is both a developing and a "socialist" country, the criteria that would commonly be applied in assessing a tax system of a developed capitalist economy can only be used with caution in evaluating China's tax system. I will use these criteria as a basis for comparing China's tax system with that of developed countries and for predicting the prospects for future development of China's tax system.


FUNCTIONS OF TAXATION IN CHINA'S SOCIALIST ECONOMY

In a capitalist market economy, taxation is the major policy instrument used by the government for transferring control over resources from the private sector to the public sector so that the state can carry out its limited range of economic functions. These functions have traditionally been analyzed under the headings: the allocation of resources, the redistribution of income, and stabilization and economic growth. 1 In China, taxation serves different purposes. Because the socialist mechanism requires the state to control resources and direct the economy through central planning, the government does not need to confiscate resources from the private sector in order to discharge its functions. Instead, taxation is used as a financial planning tool to implement national economic plans. Only after the introduction of the economic reforms that taxation has taken on roles that are, to some extent similar to those in Western countries.

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Taxation in the People's Republic of China
Table of contents

Table of contents

  • Title Page iii
  • Contents vii
  • Preface ix
  • 1 - Evolution of China's Tax System 1
  • Notes 26
  • 2 - Taxation of Goods and Services 31
  • Notes 45
  • 3 - Income Taxes on Individuals 51
  • Notes 63
  • 4 - Income Taxes on Domestic Enterprises 69
  • Notes 87
  • 5 - Income Taxes on Foreign Investment 99
  • Notes 116
  • 6 - Agriculture Tax 125
  • Notes 133
  • 7 - Local Taxes 137
  • Notes 146
  • 8 - Evaluation of the Current Tax System and Prospects for Future Reform 151
  • Notes 173
  • Selected Bibliography 177
  • Index 191
  • About the Author 195
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