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Agency Independence and Tax Revenue Growth: Evidence from the Rotation of NTBs Directors in China

【Authors】
TIAN Binbin, GU Yu
【WorkUnit】
Zhongnan University of Economics and Law, 430073.
【Abstract】

Although tax collection efficiency is an important factor affecting the growth of tax revenue, there is little research to explore the micro channels that lead to the improvement of collection efficiency. In this paper, we provide a supplement for the existing literature by understanding tax collection efficiency from the angle of agency independence. We examine the impact of changes in the independence of taxation on tax revenues, against the background of the rotation of directors of the National Tax Bureaus (NTB) that began to be implemented in the Chinese National Tax System in 1998. The study proves that the increase in the independence of the tax authorities significantly promoted the growth of tax revenues. Further, regarding different taxes, the improved independence of tax administration has a clear function boundary; it has a notable effect in promoting the collection of the taxes involving relatively high discretionary powers such as income tax and consumption tax whereas its effect upon the efficiency of VAT collection is insignificant. In addition, in the dimension of the enterprise ownership, the improvement of agency independence has a more significant effect on the increase of tax revenue from private enterprises than that from state-owned enterprises and collective enterprises. This research has important policy implications for future reform of the tax collection system.
 
JEL:H27, H77, K42

【KeyWords】
Tax Collection, Independence, NTBs‘ Directors, Rotation