Understanding Finance from scratch

Chapter 21 Who will protect the "money" and pay attention to the "invisible hand" - learn some financial supervision and regulation knowledge every day (3)
20. Proportional tax rate.Personal income tax is levied on a case-by-case basis for personal income from author remuneration, labor service remuneration, royalties, interest, dividends, bonuses, property leasing, property transfer, occasional income, and other income, and a proportional tax rate of 20% is applicable .Among them, a proportional tax rate of 30% is applicable to income from author remuneration, and a 20% reduction is levied on the taxable amount; for labor service remuneration income that is abnormally high or extremely high, in addition to being taxed at [-]%, a bonus can also be implemented Levy to protect reasonable income and limit unreasonable income.

But now there are two tendencies in China: low- and middle-income earners pay taxes, pay a lot of fees, and none of them can escape, while the rich and high-income earners pay low taxes and tax evasion is serious and common.Statistics show that my country's individual tax collection has contributed the most to the salaried class as an example.Therefore, tax reduction is the keynote of tax reform at this stage, but in terms of adjusting the disparity between the rich and the poor and regulating the real estate market, it should be to reduce taxes for the majority and increase taxes for the few.For example, in the tax adjustment of income distribution, the first step is to reduce the tax on the majority of people involved in the personal income tax, and the second is to add new adjustment taxes to the wealthy and extremely wealthy population.

Fiscal Deficit: Debt That Affects a Country's Economy
According to the 2008 fiscal revenue and expenditure released by the Ministry of Finance, the fiscal revenue growth rate was 19.5%, and the fiscal deficit was 1110.13 billion yuan.Experts believe that compared with western countries, my country's deficit rate is still relatively low.

2008年1~12月全国财政收入累计为61316.9亿元，同比增长19.5%。这低于2007年32.4%的增速水平。其中10、11两个月，财政收入出现多年不见的负增长。10月同比下降0.3%，11月下降至3.1%。以绝对值来看，四季度各月接连下降，延续了全年收入增幅前高后低、逐月快速下降趋势。

In the first 2008 months of 11, my country achieved a surplus of 1.224 trillion yuan, and there was also a fiscal surplus in 2007.However, in order to stimulate the economy, my country implemented a proactive fiscal policy at the end of 2009. In December, the national financial expenditure was 12 billion yuan, a year-on-year increase of 16601.69%.According to comprehensive statistics, the preliminary statistics of national financial expenditure in 30.8 were 2009 billion yuan, a year-on-year increase of 62427.03%.Based on this calculation, in 25.4, my country had a fiscal deficit of 2009 billion yuan.

What does the fiscal deficit refer to?What impact does it have on the overall economy of our country?

The so-called fiscal deficit means that in a fiscal year, the government's fiscal revenue is beyond its means, and there is a gap between revenue and expenditure.Why is it called a deficit?Anyone who understands common sense of accounting knows that this kind of difference needs to be written in red letters when accounting, which is the origin of the "deficit".There are two situations in which the deficit occurs: one is intentional arrangement, which is called "deficit finance" or "deficit budget", which is a type of fiscal policy; the other is that the budget does not design a deficit, but a deficit appears in the end , that is, "fiscal deficit" or "budget deficit".

When a country's fiscal deficit accumulates too high, it is like a company with too much debt, which is not a good thing for the country's long-term economic development, and it is also a long-term negative for the country's currency. The only way to solve the fiscal deficit is to reduce government expenditure or increase taxation. These two measures will have a negative impact on economic or social stability.If a country's fiscal deficit increases, the country's currency will fall. On the contrary, if the fiscal deficit shrinks, it means that the country's economy is good, and the country's currency will rise.

And when a country has a fiscal deficit, it will have an impact on the entire macro economy through government spending.This impact has two aspects: one is the scale of the fiscal deficit. The larger the deficit, the greater the impact on the macro economy; The impact is also different.

We know that the fiscal revenue of a country's government mainly comes from taxes, operating income from state-owned assets, government fees and national debt.Naturally, the government can eliminate the deficit with additional taxes, fees, or operating income from state-owned assets.However, these methods may not be able to quench the near thirst, or they may be restricted by various conditions.

So what are the most feasible ways to close the deficit?

First, use the balance over the years.Using the surplus over the years is to use the surplus formed by fiscal revenue exceeding expenditure in previous years to make up for the fiscal deficit.

The fiscal surplus shows that part of the fiscal revenue has not formed realistic purchasing power.In our country, due to the implementation of the bank agency treasury system, this part of the balance appears as an increase in fiscal deposits from the perspective of bank accounts.When the fiscal balance is used, it is manifested as a reduction in bank deposits.Therefore, as long as the balance is a real balance, there will be no problem of financial overdraft to the bank when using the balance.However, fiscal balances constitute a source of credit funds for banks, which are used for credit expenditures as production develops.

The use of fiscal balances means the reduction of sources of credit funds. If banks have insufficient reserves and fail to properly shrink credit scales to ensure fiscal withdrawals in a timely manner, it may lead to credit expansion and inflation.Therefore, in order to use the balance of the previous year, the finance must coordinate the relationship with the bank and achieve a good balance between fiscal funds and credit funds.

Second, increase taxes.Increasing taxation includes introducing new taxes, expanding the tax base and raising tax rates.But it has considerable limitations and is not a reliable way to cover fiscal deficits:

First of all, due to the provisions of the tax law, it is determined that no matter which method is used to increase taxes, it must go through a series of legal procedures, which increases the time and cost of tax increases and is difficult to solve the urgent need of the government.

Second, because increasing taxes will inevitably increase the burden and reduce the economic benefits of taxpayers.Therefore, taxpayers are extremely sensitive to tax increases and decreases, which makes the government's intention to rely on tax increases to make up for fiscal deficits often encounter great resistance, so that tax increases may not be resolved.

Finally, the Laffer curve indicates that tax increases are limited and cannot be increased indefinitely, otherwise, serious consequences will be caused to the national economy.

Third, issue additional currency.Issuing additional currency is a method to make up for fiscal deficits, and many developing countries still use this method today.But issuing more currency is not about making banknote printing factories work overtime, just print more banknotes.And in the long run, inflation depends to a large extent on the growth rate of currency, but excessive currency issuance will definitely cause inflation, which will bring vicious consequences.Therefore, using additional currency to make up for the fiscal deficit is only an expedient measure.

Fourth, issue public bonds.It is a common practice in all countries in the world to make up for fiscal deficits by issuing public bonds.When the government issues treasury bonds, the government becomes a debtor, and enterprises and individuals become creditors. In doing so, only the right to use funds has been transferred, and the total amount of currency in circulation has not increased. Therefore, inflation will generally not be caused.

From the point of view of the debtor, public bonds have the characteristics of voluntary, repayment and flexibility; from the point of view of creditors, public bonds have the characteristics of safety, profitability and liquidity.Therefore, to some extent, the issuance of public bonds is beneficial to both the government and the subscribers, and it is most acceptable to the public to make up for fiscal deficits through the issuance of public bonds.However, the government's issuance of public debt is not without impact on the economy: first, most economists believe that under the condition of constant money supply, the issuance of public debt will have a "crowding out effect" on private sector investment; secondly, when the central bank and business When banks hold government bonds, there is an inflationary effect through the money multiplier.Therefore, the government's use of public debt to make up for fiscal deficits does not mean that a country's economy has thus avoided inflationary pressures.

In short, the deficit cannot be avoided, but the deficit cannot grow infinitely like a snowball, and a certain degree needs to be mastered.This limit depends not only on its own conditions, such as the country's economic situation and financial strength, but also on the basis of empirical data and scientific analysis.At present, there are two commonly used indicators in the world to evaluate the fiscal deficit: one is the deficit ratio, which is the proportion of the deficit in GDP; the other is the debt ratio, which is the ratio of the balance of national debt to GDP.Experience shows that if the deficit ratio is within 3% and the debt ratio is controlled within 60%, the fiscal deficit is basically safe.

Financial statistics: "feeling the pulse" of the macroeconomy

福州金融业是近代史上较为发达的行业之一，其统计产生也较早。清道光年间（1821—1850年）金融业之一的典当开始兴盛，统计随之建立。福建官钱局有光绪26年至34年（1900—1908年）每年发行银元票数量统计。

In the second year of the Republic of China, there were statistics on the insurance industry.According to private insurance statistics, there are 26 private insurance companies established by foreign investors in Fuzhou, including 16 in the UK, 3 in the US, 4 in Japan, and 1 each in the Netherlands, Norway, and Denmark.In the fourth year of the Republic of China, Huashang Insurance Company also operated property insurance and life insurance.Other insurance classification statistics, including policyholder roster and receipt and payment registration.

All listed above are financial statistics, or the embryonic form of financial statistics.So what is the point of financial statistics?

Financial statistics is an important part of the national statistical system. With its comprehensive, sensitive, timely, accurate and systematic features, it provides reliable financial statistical data for the country's macro-control, monetary policy formulation, and promotion of the coordinated development of the national economy.

When there are significant fluctuations in the economy, people can easily feel them in their daily lives.For example, when there is inflation, everything becomes more expensive, and banknotes are worthless; when there is deflation, it is difficult to do any business, and it is difficult to find a job.But when the economic anomaly is just showing signs, people are not so sensitive. The price of vegetables fell yesterday, and the real estate in the east rose again today. How do you judge whether this is inflation or deflation?At this time, the role of financial statistics emerges. It sorts out, records, counts and summarizes the economic activities of thousands of micro-subjects by category: how much deposits have been increased nationwide this month, how many loans have been granted, and how much money supply is available. How much... Through the analysis of the changes in these data and the correlation between them, people can judge the current economic operation status and have a relatively clear expectation of the economic trend in a short period of time in the future.

Central banks formulate policies based on financial statistics.For example, in 2003, statistics showed that the money supply was growing too fast, and the People's Bank of China began to issue central bank bills, raise the statutory deposit reserve ratio, withdraw base money, and freeze the liquidity of commercial banks. In 2006, statistical data showed that the credit extension was too fast, and commercial banks completed half of the annual credit extension plan within three months of the first quarter, which aroused great attention from relevant departments.The People's Bank of China held a "window guidance" meeting on April 3, 2006, raised the benchmark loan interest rate on April 4, and raised the benchmark interest rate of RMB deposits and loans again on August 27. The intention of introducing these policies is to control the supply of loans rhythm, and moderately curb over-investment.

So, how are financial statistics formed?

Every year, I don't know how many people from all over the country go to the bank to open accounts, deposits, and loans, and how many companies have capital exchanges with banks.But within a few days, the annual data on national deposit scale, loan scale, money supply and other indicators will be on the desks of policymakers.Don't underestimate those small numbers, they are the original source of financial statistics.To get the final figures, the People's Bank of China first needs to rely on various financial institutions to submit data based on various actual businesses.Data can only be collected and aggregated if the standards are consistent. The People’s Bank of China has established a common statistical system for this purpose, unifying subjects, unifying data indicators, standardizing data sources, and formulating coding rules.With the help of computers, all kinds of data are sorted and processed in an orderly manner, and the final statistical results can be displayed soon.

Of course, the People's Bank of China will also carry out several institutional statistical surveys:
Business climate survey.The object is 5000 industrial enterprises, and the survey involves 27 industries, including part of the monthly corporate financial status survey and quarterly corporate questionnaire survey.

Depositor survey.The People's Bank of China surveys about 50 depositors in 20000 large and medium-sized cities across the country on a quarterly basis. Changes in consumption, investment behavior and psychological expectations.

Banker survey.A quarterly questionnaire survey of heads of various banking institutions across the country.

Enterprise commodity price survey.The object of the survey is material goods produced domestically and sold domestically, reflecting monthly changes in wholesale price levels.This survey and the above-mentioned surveys are an important basis for the central bank to judge the economic situation and formulate financial macro policies.

At this stage, my country's financial statistics system is not mature enough, and there are still some problems:
For example, financial statistics are poorly correlated with local economic statistics and national economic statistics.Financial statistics have always analyzed financial data in isolation from financial data, which is out of touch with local and national economic statistics. There is no comparison and correlation between monetary indicators, fiscal indicators, and economic indicators. This single data can explain very little. It is impossible to analyze whether the financial operation is suitable for the local economic development, and it is impossible to predict the restriction and impact of the local economy on finance.

Another example is that in the daily statistical work, there is a bad tendency of focusing on reports, neglecting analysis, focusing on data collection, and neglecting the application of results.Statistical work should focus on mathematical analysis and integrate isolated and scattered data to serve the work. Unfortunately, in actual work, the final results of most statisticians are only to form thick statistical tables, which are simply repeated day after day. I don’t want to dig out the connotation it represents from the numbers. If the report is [-]%, everything will be fine. The analysis report is often a cliché, copying the same, resulting in two skins between the data and the conclusion. reference, correction and improvement functions.

But as ordinary investors, we should also learn to interpret financial statistics, because behind a few simple financial statistics, the real situation of China's financial operation is often hidden.

(End of this chapter)