Research on Tax System Arrangement under Supply-side Structural Reform

Abstract

China proposes that supply-side structural reforms should be carried out in the context of serious contradictions and problems such as overcapacity and serious contradictions of upgrading of demand structure, and insufficient inner motivation for economic growth. From the perspective of short-term supply and demand management and long-term supply and demand management, this paper analyses the theoretical basis of taxation system arrangement under supply-side structural reform, construct the method of assessing the impact of taxation system under supply-side structural reform. From the perspective of supply-side structural reform and the construction of innovative taxation governance system, this paper puts forward policy suggestions on tax system arrangement under supply-side structural reform. Theoretical Basis of Taxation System Arrangement under Supply-side Structural Reform Say's law: In 1803, F rench economist J.B.Say proposed that in the two exchange modes of exchanging product for money and money for products, the role of money is only momentary. After the transaction, the transaction is to exchange one kind of goods for another kind of goods. For either the seller or the buyer, supply creates demand. Keynesian law:In the 1930s, the Great Depression broke out in the major capitalist countries of the world, the phenomenon that supply could not create demand on its own was gradually emerging. Keynes believes that under the combined influence of diminishing marginal propensity to consume, diminishing marginal efficiency of capital and rising interest rates caused by liquidity preference, aggregate demand will be insufficient and the economy will decline. He also believes that in response to the economic recession, governments should manage aggregate demand, and conduct expansionary fiscal and monetary policies to stimulate aggregate demand. Theory of Supply-side Economicsl: In the early 1970s, stagflation generally occurred in developed capitalist countries. On the one hand, economic development stagnated, while on the other hand, prices was rising continually. The usual demand management tools of governments have encountered an unprecedented dilemma, at that time, supply-side economics proposed their theory. Supply-side economics believe that the lack of supply is caused by excessive intervention of governments in economy and excessive tax burden. Therefore, in order to cope with stagflation, it is necessary to replace demand management with supply management, and to stimulate aggregate supply by reducing intervention of governments in the economy and drastically reducing tax burden.