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A Market Economics Approach to Taxation and Regulation of Non-Profit Organizations Analyses and Recommendations for China

There is little disagreement that tax laws and regulations relating to non-profit organizations in China need to be changed. In this paper, we recommend comprehensive, not marginal, changes to China's tax laws for non-profit organizations (NPOs). The fundamentals of the sector and market economics suggest that the government should regulate the sector according to these principles: allowing people to make choices; using information conveyed by people's choices to identify NPOs worthy of government support; and providing incentives to organizations that help to achieve fairness in resource distribution.