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The Impact Of Fiscal Decentralization On Tax Effort Of China'S Local Governments After The Tax Sharing System

Author

Listed:
  • JR-TSUNG HUANG

    (Department of Public Finance, National Chengchi University, No. 64, Sec. 2, Zhi-nan Rd., Wenshan, Taipei 11605, Taiwan)

  • KUANG-TA LO

    (Department of Public Finance, National Chengchi University, No. 64, Sec. 2, Zhi-nan Rd., Wenshan, Taipei 11605, Taiwan)

  • PO-WEN SHE

    (Department of Economics, University of Essex, UK)

Abstract

The purpose of this study is to investigate whether and to what extent fiscal decentralization affects tax effort of local governments in China after the Tax Sharing System (TSS). This research provides different indexes of tax effort and fiscal decentralization in analysis. By using the panel data of 31 regions in China during the period of 1996–2006 and the two-way fixed-effect model, the empirical results show that fiscal decentralization has a significantly positive impact on tax effort of local governments. In addition, this positive influence of fiscal decentralization on tax effort increases over time. Finally, trade openness and industrialization level also will enhance the local government's tax effort.

Suggested Citation

  • Jr-Tsung Huang & Kuang-Ta Lo & Po-Wen She, 2012. "The Impact Of Fiscal Decentralization On Tax Effort Of China'S Local Governments After The Tax Sharing System," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 57(01), pages 1-22.
    • Handle: RePEc:wsi:serxxx:v:57:y:2012:i:01:n:s0217590812500051
    DOI: 10.1142/S0217590812500051
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    References listed on IDEAS

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    1. Mr. Taimur Baig & Mr. Abdul d Abiad, 2005. "Underlying Factors Driving Fiscal Effort in Emerging Market Economies," IMF Working Papers 2005/106, International Monetary Fund.
    2. Richard M. Bird & Jorge Martinez-Vazquez & Benno Torgler, 2014. "Societal Institutions and Tax Effort in Developing Countries," Annals of Economics and Finance, Society for AEF, vol. 15(1), pages 301-351, May.
    3. Bahl, Roy W. & Wallich, Christine, 1992. "Intergovernmental fiscal relations in China," Policy Research Working Paper Series 863, The World Bank.
    4. Jorge Martinez-Vazquez & LF Jameson Boex, 1997. "An Analysis of Alternative Measures of Fiscal Capacity for Regions of the Russian Federation," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper9704, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    5. James Alma & Jorge Martinez-Vazquez & Friedrich Schneiderb, 2005. "'Sizing' the Problem of the Hard-to-Tax," Contributions to Economic Analysis, in: Taxing the Hard-to-tax: Lessons from Theory and Practice, pages 11-75, Emerald Group Publishing Limited.
    6. Richard M. Bird & Jorge Martinez-Vazquez & Benno Torgler, 2014. "Societal Institutions and Tax Effort in Developing Countries," Annals of Economics and Finance, Society for AEF, vol. 15(1), pages 301-351, May.
    7. Ms. Janet Gale Stotsky & Ms. Asegedech WoldeMariam, 1997. "Tax Effort in Sub-Saharan Africa," IMF Working Papers 1997/107, International Monetary Fund.
    8. Jorge Martínez Vázquez & Robert M. McNab, 2006. "Fiscal decentralization, macrostability and growth," Hacienda Pública Española / Review of Public Economics, IEF, vol. 179(4), pages 25-49, September.
    9. Agúndez-García, Ana, 2000. "Fiscal Revenues Decentralization And Regional Economic Growth," ERSA conference papers ersa00p272, European Regional Science Association.
    10. M. Nagy Eltony, 2002. "Measuring Tax Effort in Arab Countries," Working Papers 0229, Economic Research Forum, revised 03 Oct 2002.
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    2. Wei Kong & Wenxiu Hu & Kaicheng Liao & Xiaoqiang Ma, 2021. "Local Financing Platform Loan and Performance of City Commercial Banks: Evidence from City Commercial Banks in China," Hacienda Pública Española / Review of Public Economics, IEF, vol. 238(3), pages 81-99, September.

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    More about this item

    Keywords

    Fiscal decentralization; tax effort; tax sharing system; China; C33; H11; H77;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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