Legal Analysis of the Tax Expenditure System

Xuhong　Li（Economic　Law）

Supervised　by　Prof.　Jianwen　Liu

Abstract

The　tax　expenditure　system　has　been　regarded　as“the　important　invention　in　public　finance　and　taxation　over　the　past　two　to　three　decades”by　the　western　scholars.　The　concept　of　tax　expenditure　originates　from　the　USA　in　the　late　1960s.Since　then,　Britain,　France,　the　Netherlands,　Austria,　Canada,　Spain,　Australia,　Poland,　Japan,　Korea　and　other　OECD　countries　have　established　the　legal　system　of　tax　expenditure.Tax　expenditure　is　a　special　government　spending,　for　which　the　state　formulates　and　implements　special　tax　laws　and　policies　to　provide　preferential　tax　treatment　for　certain　taxpayers　and　tax　items　to　relieve　the　tax　burden　and　achieve　the　set　social　and　economic　policy　targets.The　system　of　tax　expenditure　is　a　system　to　calculate,　estimate,　analyze,　evaluate,　report,　plan　and　control　the　tax　revenue　forgone　due　to　all　sorts　of　tax　incentives,　a　system　that　is　made　for　scientific　and　systemic　management　of　tax　incentives　in　accordance　with　the　principle　of　the　legalism.The　tax　expenditure　system　provides　new　insights　and　methods　for　the　tax　incentives　management,　and　is　used　as　a　financial　analysis　tool　in　many　countries.

In　China,　the　number　of　the　existing　tax　expenditure　items　is　over　900.　Great　attention　should　be　paid　to　the　economic　and　legal　phenomena,　which　has　exerted　and　is　still　exerting　comprehensive　and　significant　impact　on　the　economic　and　social　development.We　should　parse,　compare,　analyze　and　identify　those　phenomena　with　the　legal　analysis　tool.We　have　not　established　a　scientific,　normative　and　efficient　system　of　tax　expenditure　in　China　today.In　consideration　of　the　legal　issues　of　the　tax　expenditure＆nbsp；system,　and　the　related　theory　and　legislative　issues　of　establishing　the　tax　expenditure　system　in　China,　this　paper　carries　out　the　discussion　in　the　following　sections：

The　first　chapter　is"to　explore　the　basic　theory　of　tax　expenditure——from　the　perspectives　of　both　jurisprudence　and　economics."On　the　basis　of　studying　all　kinds　of　responses　to　the　international　financial　crisis　both　at　home　and　abroad,　the　author　raises　the　issues　of　tax　incentives　and　tax　expenditure,　then　analyzes　the　concept　of　tax　expenditure　by　the　method　of　economics　analysis,　expounding　the　specific　forms,　developments,　and　composition　of　tax　expenditure,　and　conducting　comparative　studies　between　tax　expenditure　and　tax　incentives,　between　tax　expenditure　and　direct　fiscal　expenditure.　In　the　meantime,　the　author　analyzes　the　legal　nature　of　tax　expenditure　based　on　the　theory　of　debt　of　public　law,　and　its　legal　relation　by　the　method　of　legal　analysis　in　a　creative　way.The　effects　of　tax　expenditure,　including　financial　and　tax　effects,　micro-revenue　effects,　socio-economic　effects　were　also　analyzed　with　the　economic　analysis　method　and　comparative　analysis　method.

The　second　chapter　is　an"empirical　and　comparative　analysis　of　tax　expenditure　system."As　is　commonly　applied　in　western　developed　countries,　the　concept　oftax　expenditure　and　the　establishment　of　the　tax　expenditure　system　are　of　great　significance　to　the　development　of　western　fiscal　and　legal　systems.　The　author　makes　an　empirical　and　comparative　analysis　about　the　tax　expenditure　system　in　the　western　countries,　especially　the　OECD　countries,　and　conducts　a　research　on　the　origin　and　the　background　of　the　system,　making　comprehensive　comparative　analysis　on　the　legal　requirement,　the　form　of　report　system,　the　definition,　the　content　and　composition　of　the　report　system,　the　measurement,　function,　division,　scale,　performance　evaluation　of　the　tax　expenditure,　the　value　of　report　system,　the　budget　control,　etc,　so　as　to　underline　the　basic　situation　of　tax　expenditure　and　current　differences.Meanwhile,　the　author　carries　out　an　empirical　study　about　the　development　process　of　China's　tax　expenditure　policy　and　the　current　situation　of　tax　expenditure　management.Also　the　author　introduces　the　Chinese　classification,　identification　method,　and　the　historical　category,　etc.

The　third　chapter　is"the　exploration　of　theoretical　problems　of　establishing　the　legal＆nbsp；system　of　tax　expenditure."The　author　tries　to　explore　the　important　theoretical　problems　related　to　the　establishment　of　the　legal　system　of　tax　expenditure　under　the　mainstream　framework　of　economic　law　and　tax　law,　creatively　puts　forward　and　build　the　principle　of　tax　expenditure,　makes　dialectic　and　argumental　critique　on　the　priority　of　tax　expenditure,　and　contributes　to　the　improvement　of　the　current　legal　research　in　terms　of　normative　analysis　of　tax　expenditure,　the　development,　instrumental　value　and　target　value　of　tax　expenditure　system.

The　fourth　chapter　discusses　the“ideas　and　suggestions　to　improve　the　legal　system　of　tax　expenditure　in　China."Based　on　the　analysis　of　the　current　situation　and　the　major　problems　of　tax　expenditure　in　China,　the　author　summed　up　the　necessity　and　feasibility　of　the　building　of　the　legal　system　of　tax　expenditure,　and　put　forward　the　relevant　suggestions.　The　establishment　of　tax　expenditure　system　is　a　revolution　in　the　public　finance　and　tax　field.The　fiscal　law　and　tax　law　will　also　be　the　forms　and　results　of　the　transformation.Learning　from　the　legislation　experience　of　the　foreign　countries,　and　in　reference　to　the　relevant　laws,　the　author　makes　some　concrete　suggestions　to　amend　the　Budget　Law　of　China,　to　enact　Tax　Expenditure　Management　Regulations　and　the　relevant　operational　methods　within　the　legislative　framework.

Keywords：Tax　Expenditure；Public　Expenditure；Tax　Liabilities；Tax　Incentive