China’s Taxation Reform and Innovation-Driven Development Strategy

Social Sciences in China (Chinese Edition)

No.3, 2018


China’s Taxation Reform and Innovation-Driven Development Strategy



Xu Duoqi


The new round of tax reform has been launched and carried forward against the background of the national innovationdriven development strategy, which itself is a banner and a beacon for the new reform of taxation. Tax reform must conform to the direction and requirements of the development strategy, and the two must work together to guarantee the free flow of innovation. The implementation of statutory tax preferences is the starting point for the way tax reform serves the innovation-driven development strategy. Inclusion of tax preferences in the annual budget in the form of dedicated tax expenditures is a positive measure to overcome the various shortcomings of China’s tax preferences. Not only does this policy provide a means of unifying the stability and variability of preferential tax policies and regulations; it is also desirable for maximizing the realization of legal reservations and putting statutory tax preferences into effect. Optimizing the tax structure is the main battleground for the way in which the reformed tax system will serve the innovationdriven development strategy, and this optimization needs to be achieved through the in-depth reform of the tax system. A series of institutional innovations in the tax system will provide a desirable tax environment in terms of tax systems and mechanisms for the implementation of innovationdriven development strategy, thus forming a “two-wheel drive” system composed of taxation innovation and technological innovation.