Economics regression analysis paper

This paper will analyze the relationship between price level, economic level’s fluctuation and the tariff income after China’s Reform and Opening Up policy. The relationship will be analyzed based on the statistics between 1978 and 2017 by using the regression model. The independent variables will be price level, industrial structure, and GDP scale, and the dependent variable will be tariff income level.

China made significant reforms in taxation in 1994. China's macro taxation has shown a long-term upward trend. Tax revenues have increased significantly and far exceed the economic growth rate in the same period (Wong, 2000, p.57). This phenomenon has aroused considerable attention among scholars. Most scholars admit that the growth rate of tax growth rate is mainly due to the high growth rate of gross domestic product (GDP) in recent years (Wu et al., 2012, p.279).

With regards to the relationship between the tax growth rate and economic growth rate, the economic level will be measured by the GDP scale and industrial structure. These two factors are set as the main factors of driving the changes in tax. After implementing Reform and Opening Up Policy, China's total economic volume has experienced four cyclical fluctuations (Liang & Teng, 2006, p.398). This paper hypothesis that if the macroeconomic situation does not change significantly from both the international and domestic perspective, the steady trend of GDP growth will continue. Meanwhile, the tax revenue will have a positive relationship with the change of industrial structure. Besides, the growth of tax revenue is influenced by multiple factors such as the economic growth, the taxation adjustment and reform, the tax collection and management level, culture (Toh & Lin, 2005, p.255). In this paper, it will analyze the relationship between the tax growth rate and the price level. The statistics show that in 2000, price increased as the tax revenue increased simultaneously. Similarly, in 2001, the price level dropped slightly down, and the tax level also decreased (Du & Zhang, 2015; Trading Economics, 2018, p.561). Therefore, it posited the hypothesis that the tax revenue has a positive relationship with the price level.

References

Du, Z., & Zhang, L. (2015). Home-purchase restriction, property tax and housing price in China: A counterfactual analysis. Journal of Econometrics, 188(2), 558-568.

Liang, Q., & Teng, J.Z. (2006). Financial development and economic growth: Evidence from China. China economic review, 17(4), 395-411.

Toh, M.H, & Lin, Q. (2005). An evaluation of the 1994 tax reform in China using a general equilibrium model. China Economic Review, 16(3), 246-270.

Trading Economics. (2018). China Government Revenues 1990-2018. [online]. Retrieved October 4, 2018, from: https://tradingeconomics.com/china/government-revenues

Wong, C. P. (2000). Central-local relations revisited the 1994 tax-sharing reform and public expenditure management in China. China Perspectives, 52-63.

Wu, W., Wu, C., Zhou, C., & Wu, J. (2012). Political connections, tax benefits and firm performance: Evidence from China. Journal of Accounting and Public policy, 31(3), 277-300.

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Yishu Huang