Transformation of the Fiscal and Taxation Systems

Series Editor’s Preface: The Year 2020—A Historic Choice of Economic Transformation and Upgrading
Contents
List of Figures
List of Tables
1 Introduction
1.1 New Stage and New Challenges for China to Achieve Its Strategic Goal of Modernization and an Inevitable All-Round Reform
The Requirement of the Times to Continue to Promote Economic and Social Transition Under the Concept of “Modern National Governance”
The Realistic Need for Fiscal and Tax Reform to Support Comprehensive Reform Under the New Normal of Economic Development
1.2 Philosophical Thinking and Path Choice for Linking the Strategic Goals of Modernization with Inclusive Growth
Strategic Thinking and “China’s Choice” from a Strategic Perspective
The Illusion of “Government Can Do Everything” Is False, and the Process of “Welfare Catch-Up” Is Difficult to Avoid Haste
The Rational Premise of Fiscal and Taxation Services: “Let the Market Fully Play Its Role”
1.3 Support for Comprehensive Reform of Public Finance: Review and Prospect
Landmark Significance and Historic Contribution of Tax Distribution Reform in 1994
The Tax Distribution System Should Be Consistent with the Market Economy
A Complete and Accurate Understanding of Several Important Points That Should Be Clarified in the Tax Distribution System
The Proposal of Public Finance and the Construction of Public Finance System
1.4 The International Practice of Tax Distribution System and Reference to China
The Basic Situation of the US Tax Distribution System
Basic Situation of German Tax Distribution System
Basic Information of Japan’s Tax Distribution System
Inspiration from Tax Distribution System of Market Economy Countries
Overview of Fiscal and Tax Management Systems of the Republic of Korea and Hong Kong, China
2 Problem Orientation: Prominent Problems Facing China’s Fiscal and Taxation System
2.1 Problems to Be Straightened Out of China’s Current Fiscal System of Tax Distribution
Issues Concerning Administrative Power and Expenditure Responsibility
Inter-governmental Income and Taxation Issues
Problems in the Transfer Payment System
Financial System Problems Below the Provincial Level
2.2 Insufficient Support of Management System Needed for Policy Optimization and Performance Improvement
Full-bore Budget Problem
Performance Management and Accountability Mechanism
The Reform of Government Accounting System
Imperfect Audit and Supervision System
2.3 Issues Related to Fiscal Sustainability
The Economic Slowdown Has Brought Down the Growth Rate of Fiscal Revenue
The “Lewis Turning Point” Appears and the Demographic Dividend Disappears
Infrastructure Investment Space Is Still Considerable, Social Spending Pressure Increased
Accumulation of Financial Risks
2.4 Analysis of Resistance and Obstacle Factors of the Reform
Solidification of the Concept/Understanding
Legal Restriction and Absence
Constraints/Generated by Path Dependence
Resistance from People with Vested Interests
3 Goal Lead: The General Idea, Basic Goal and Path of Fiscal and Taxation System Reform
3.1 General Idea
3.2 Basic Goal
Clearly Define Government Functions and Responsibilities and Financial Functions
Improve the Division of Governmental Powers and Expenditure Responsibilities
Reasonably Divide the Tax Base/Tax Rate in Combination with Tax Reform
Adjust the Fiscal Relationship Between the Central and Local Governments and Improve the Transfer Payment System
Improve the Budget Management System and Improve the Government Budget System
3.3 Path
Take the Government Flattening Reform as the Framework
The Matching Logic Is Based on Reasonable Adjustment of Power
Drive Tax Reform and Inter-governmental Income Distribution Reform with the Construction of Local Tax System
Embody the Principle of Priority of Power in a Standard Transfer Payment System
Establish a Modern Public Budget Management System as the Basic Support
Taking the Administration of Creditor’s Rights and Property Rights as Important Elements
4 Practical Operation: Build a Modern Fiscal and Taxation System Suitable for the Modernization of National Governance
4.1 Form a Scientific and Standardized Inter-governmental Financial Distribution Relationship
Clearly Define the Functions and Responsibilities of the Government, and Scientifically Divide the Inter-governmental Powers and Expenditure Responsibilities
Improve the Division of Government Revenue to Meet the Needs of Changing the Growth Model
Further Deepen Reform of the Fiscal System at and Below the Provincial Level
Improve the System of Transfer Payments and the Mechanism for Ensuring Grassroots Financial Support
4.2 Improve the Budget Management System and the Government Budget Management System
Continue to Deepen Reform of the Full Bore Budget Management
Improve the Annual Budget Control Method and Establish a Cross-annual Budget Balance Mechanism
Vigorously Promote Budget Openness and Establish a Transparent Budgeting System
Clear Up and Standardize the Linkage Mechanism, and Optimize the Allocation Structure of Fiscal Funds
Further Improve the Treasury Payment System and Treasury Cash Management System
Strengthen Budget Implementation Management and Actively Promote Budget Performance Management
Accelerate the Construction of an Information System for Fiscal Revenues and Expenditures
4.3 Deepen Tax Reform and Accelerate the Establishment and Improvement of the Local Tax System
The Basic Principles and Roadmap for Deepening Tax Reform
Make the Tax System More Progressive and Give Play to the Role of Taxation in Adjusting Income Distribution
Reduce Tax Distortions and Promote Steady Economic Growth
Improve the Local Tax System and Enhance the Revenue Capacity of Local Governments
Implement Tax Collection and Administration Reform and Improve the Efficiency of Tax Collection and Administration
Supporting Reform Measures to Promote Tax Reform
4.4 Further Deepen Reform of the Management of Government Expenditures
Improve the Structure of Government Expenditures
Optimize the Pattern of Government Expenditures and Improve the System of Spending Quotas and Standards
Strengthen the Performance Evaluation of Fiscal Expenditure
Improve the Government Procurement System and Actively Promote the Government to Purchase Public Services
4.5 Improve the Government Debt Management System
Establish and Improve the Local Debt Management System
Improve the Operation of National Debt and the National Debt Balance Management System
5 Risk Prevention and Control and Supporting Linkage
5.1 Evaluation of the Basic Situation of Financial Risks
Local Government Debt has Increased Substantially, and the Overall Risks are Under Control
Outstanding Problems Existing in Local Government Debt
A Fundamental Approach to Local Government Debt
5.2 The Framework and Key Points of the Financial Risk Prevention System
Speed up the Improvement of the System and Eliminate the Mechanism of Local Governments’ Improper Borrowing
Govern the Stock and Control the Increase, and Establish a Sunshine Local Debt Classification Management System
Build a Standardized Sunshine Financing System for Local Governments as the Basic Point to Promote the System Construction
Establish and Improve the Local Debt Risk Control Mechanism of “Central Regulation + Market Constraint”
5.3 Coordinate and Promote Fiscal and Tax Reform and Other Reforms
Price, Tax and Fiscal Reform Linkage
Establish a Reasonable Sharing Mechanism for the Proceeds from the Transfer of Public Resources
Establish a Complete Financial and Tax Information Data System with Big Data
Actively Deepen Reform of the Administrative System
Deepen the Reform of the Land System and Establish a Virtuous Circle of Land Finance
Accelerate financial Reform and Coordinate with Fiscal and Taxation Reform
Establish a Mechanism for Coordinating International Fiscal Policies
Postscript
References