The linkage between the taxes and GDP in China

Abstract

The purpose of this project is to determine the relationship between tax revenue and GDP in China, and any potential problems in China’s tax system will be identified. It uses the past 10 years national GDP and tax revenue collected from the Statistical Yearbook of China in order to make a reasonable conclusion whether China’ current tax system is appropriate for its economic development. In the study, the VAR model, ADF Unit Root Test and Granger causality test are used. From the output, the tax revenue affects the economic development positively and the growth of tax revenue in China in past years has been so fast that it can’t adapt to actual requirements of the national economy.