Attach Great Importance to The Sustainability of Local Government Finance in Tax Cuts And Fee Reduction
Abstract: In order to implement the counter-cyclical economic adjustment, the government greatly reduced the benchmark tax rate of VAT, and simultaneously greatly reduced the key social security rates borne by enterprises in the fiscal policy in 2019. In 2018, the government gave 1.3 trillion yuan in tax cuts to businesses and individuals. These tax cuts add up to less than 0.1% of economic growth. The main reason for making tax cuts for the manufacturing sector the focus of VAT tax cuts in 2019 is that it will help to promote fair tax burden in the manufacturing sector. The purpose of further lowering the value-added tax rate of transportation and construction industry is to correct the unreasonable tax rate structure in the reform of "business tax to value-added tax". In 2019, the tax cuts, which are expected to stimulate the economy to grow by an additional 0.12 percent point, are expected to cut taxes by about 2 trillion yuan. 80% of these tax cuts and fees are reduced by local government revenue, which puts great pressure on local government finance and seriously affects the sustainability of local government finance. It is necessary to speed up the establishment and improvement of the local government tax system, appropriately increase the channels of local government financial revenue, and maintain the healthy and sustainable development of the financial and taxation system.
Key words: tax cuts; economic growth; fiscal policy; the sustainability of local government finance