Implications for cooking oil Factories and the government
Excessive use of electricity tax will play an important role in energy saving and sustainable development. However, there will be implications both positive and negative considering all the factors.
GDP which is measured with the value of the final products namely the final sale value in a period, is a general index to measure the level of economy development (Hayami, 2000). So when there is an excessive use of electricity tax leading to the increase of the cost of cooking oil, the final price at which markets sell to the people will obviously increase. Accordingly, the consumption level of residents will simultaneously be improved. The more important is that consumption takes up a very big part in the calculation of GDP, which is to say when the consumption level is improved, GDP will also increase. We can also see it in Table 1, the proportion of GDP from tax is big and has increased year by year (Gai, 2007). Besides, tax revenue is the major source of revenue in China and almost 95 percent of the revenue is from tax. Obviously, the government’s revenue will increase because of the excessive use of electricity tax.
Between tax revenue and CPI, there are also some complicated relations. Impersonal tax revenue accounts for 7 percent of the total tax revenue in China and it has a huge impact on CPI (Xin, 2011). Since the cost of producing cooking oil increases due to higher tax on the factories, the price of the cooking oil will inevitably go up. And then, the burden of the price increase will totally passed to the common people, who have to buy oil. Finally, the common people will pay for the extra tax, which will increase the national consumption. Meanwhile, CPI will be pushed up.