The key and core of balancing "steady growth" and "structure adjustment" lies in the optimization and formation of industrial structure of "supply-side structural reform". This article systematically analyzes the impact mechanism of market opening and local fiscal and tax competition on industrial structure adjustment, and uses panel data from 29 provinces, municipalities and autonomous regions in China from 2003 to 2014 to conduct an empirical test. The results show that market opening has significantly promoted the adjustment of industrial structure, but there are regional differences in the force of international market opening and domestic market opening. The opening of the domestic market in the eastern region has a greater force, while the central and western regions have the opposite effect. Local fiscal and tax competition on the one hand is conducive to the advancement of the industrial structure, on the other hand it inhibits the rationalization of the industrial structure. This article further investigates and finds out that local fiscal and tax competition will weaken the effectiveness of market opening to promote the rationalization of industrial structure. There exist a "Laffer Effect" in the process of industrial structure transformation. As long as structural tax cuts are consistent with the direction of industrial structure adjustment, the industrial structure can be optimized while increasing fiscal revenue. To a certain extent, local fiscal expenditures have promoted the advancement of the industrial structure, but the economic constructive expenditures among them will distort the allocation of resources and inhibit the rationalization of the industrial structure. Local taxation policy has a significant structural effect on industrial structure adjustment, and income tax tends to optimize the industrial structure more than commodity tax. These research conclusions have important policy implications for deepening market opening, correcting local government competition behavior, and implementing reforms of fiscal and taxation system.
