A Study On Fundamental Principles Of Fiscal Law Of China

This dissertation aims at exploring and clarifying fundamental principles that can serve as a basis for improving legal regulation of public finance of China in the socialist-market-economy context, and further based on this recommending some improvement of the present fiscal legislation and their enforcement. For this purpose the dissertation consists of eight chapters, the first two of them being a general analysis of issues common to all fundamental principles. Chapters three to seven deal respectively with principles of fiscal democracy, rule of law in relation to public finance, balance of fiscal centralization and decentralization, fiscal fairness and efficiency. Chapter eight, conclusion of the dissertation, explains the relationship among the five proposed principles and their application.In Chapter 1, introduction of the dissertation, the author demonstrates the aim and framework of the research first, and then briefly defines the basic concept"public finance"as government practices that involves or results in government income-collection or public spending. Following this is detailed discussion of significance and importance of studies on fundamental principles of fiscal law. In recent years disorder in government fiscal practices, such as illegal fee-collection and corruption increases dramatically. Meantime legal regulation of public finance in China is widely considered as being poor and loose by both the public and academics. It is also noted that the mechanism of public finance is changing rapidly as market-oriented economic reform progresses. These and other factors indicate that legal regulation of government fiscal practices urgently needs to be strengthened and improved. Studies on fundamental principles of fiscal law will serve as a basis upon which our fiscal law can be both improved and strengthened. A survey of literature on this issue in relation to the Chinese background conducted by theauthor suggests that research on this issue is relatively rare, and the few available publications are either outdated or in dispute. This renders the present study even more significant than otherwise.Chapter 2 is a general analysis of features common to all the proposed principles, which will be individually dealt with in turn later. Here fundamental principles of fiscal law are defined as basic and guiding rules with general and steady application and supreme binding force expressly provided or implied by law. Where there is no relevant law or the present law does not have relevant provisions the fundamental principles should be established according to basic logic, constitution and public opinion based on social and economic reality. Having these factors in mind the author proposes five possible fundamental principles of Chinese fiscal law, and also explains why other principles, especially the widely recognized balanced-budget principle is not included. Function of these fundamental principles is also discussed. It is pointed out that once being established these principles could be applied to guide relevant legislation, fiscal administration and judicial decision-making.From Chapter 3 the author turns to deal with individual principles respectively. In discussing principle of fiscal democracy in this chapter, historic development and significance of fiscal democracy in some typical developed countries is exemplified first. Then from a normative aspect the author tries to justify democratic nature of the Chinese public finance on the basis of economic and social foundation and the nature of the State stipulated in the Constitution. It is proposed that the principle of fiscal democracy has three basic legal requirements. The first is democratic decision-making on fiscal affairs, the second publication of fiscal affairs or transparency, and the third democratic supervision on public finance. The author also explains in detail the meaning, relationship and significance of these requirements. It is suggested that for public finance to be democratic it is not sufficient that public money is used for the public, and rather public finance in the nature of democracy requires that public money is used according to the public will and choice through lawful procedures. Finally the author stresses that the democratic principle is of special importance among the five proposed principles, and is also especially relevant to the present fiscal practices by various governments.Chapter 4 discusses the principle of rule of law in relation to public finance, which is considered as a necessary constituent of the general policy of a state ruled by law. The rule of law principle has five elements. The first is that fiscal powers of any and all entity can only be obtained from express authorization by law. The second is that the procedures through which income is collected and public money spent by governments or other authorized entities should be provided for by law and performed according only to law. Subjects or entities qualified to enjoy fiscal benefit or to bear fiscal burden should also be identified according to law, and this constitutes the third element. The fourth is that categories and form of government income and public spending should also be established by law. The final element of the principle is that legal liability for unlawful fiscal practices should be expressly stipulated in law and strictly imposed on offenders. In order to establish and apply the rule of law principle, the author considers that three important issues have to be clarified. Firstly, although leadership of the Chinese Communist party is very important, management of public finance is function of government and not of a party, and the party leadership should be realized through the mechanism provided for by Constitution and law and within this limit. Secondly, fiscal policies of the government are important in terms of macro-economic balance and structural adjustment, but these policies should not be considered as a basis for enacting fiscal law principles. Rather such policies'formation and their application should be conducted within the framework established by law. Finally, public finance should not be managed in a way like political movements, which often damages supremacy of the law and disturbs normal order of fiscal management. A normal and acceptable order of fiscal management can only be built up though legal regulation.Chapter 5 explores balance of fiscal centralization and decentralization in the Chinese background. After defining the concept of fiscal system in this context the author tries to prove that a certain degree of fiscal centralization in a country such as China is still very important, for this is beneficial to national integration, various nations'unification, balance of development of different areas, macro-economic adjustment and control, and realization of social fairness in the whole nation. Meanwhile, consideringtheoretical development in the area of public finance, the historical evolution of the Chinese fiscal system and international experiences, fiscal decentralization should be strengthened and local governments should be able to play a role more active and independent than before, for this will mean that local communities'demand for at least some public goods and services could be satisfied by local governments in accordance with democratic and efficient requirement. Based on this the author proposes some standards by which central and local governments'fiscal function could be divided in law, and also explores some concrete topics in this area, such as budget management and control, transfer payment and taxation by provincial governments.Chapter 6 deals with the principle of fiscal fairness, which is defined as such a distribution of fiscal benefit and burden and relevant power, rights and obligation that is considered by majority of the public as being justifiable. It is also explained that such a fiscal distribution is inevitably combination of equal and differentiated fiscal treatment of people in the same or different conditions. The fairness requirement for public finance in China roots in the nature of the Chinese economy and political system, and has solid foundation in the Constitution. The establishment of the fiscal fairness principle is significant because the fiscal law based on this could greatly promote political and social stability, national unification and fiscal democracy. The principle requires fairness of both fiscal collection and spending. Thus the author discusses legal framework through which fiscal fairness could be enhanced in relation to taxation, fee-collection, public debt and balance of interests of different generations, transfer payment and spending budget management, and also recommends that some change should be implemented in those areas.Chapter 7 concentrates on fiscal efficiency, by which the author means both administrative and distributive efficiency of public finance. In order to enhance administrative efficiency of fiscal management the author proposes unification of the present dual taxation system, simplification of various types of taxes, strict control of funding to fiscal and taxation branches of governments, simplification of various relevant procedures and establishment of a system of efficiency evaluation and monitoring. On the issue ofdistributive efficiency of public finance the author discusses distributive effect of both income collection and spending by the government and its implications for legal regulation. Finally it is stressed that attention should be paid to cost or benefit overflow effect of fiscal distribution, and also to balance of fiscal efficiency with other public interests such as environment protection, resources maintenance and social fairness. Under the present stage of economic and social development in China, the author suggests that fiscal fairness should be a policy objective superior to fiscal efficiency, although the two objectives sometimes are not in conflict with each other.Chapter 8, conclusion of the dissertation, comments on relationship of the five proposed principles first. The principle of fiscal democracy is considered as being most important among them since it concerns the basic nature and objective of public finance. The rule of law principle provides the only channel through which fiscal democracy can be effectively guaranteed. Balance of fiscal centralization and decentralization stipulates a concrete form for fiscal democracy to be realized in the Chinese context, while principles on fiscal fairness and efficiency guide and regulate distribution of substantive interests in the area of public finance. Finally, major issues concerning application and enforcement of these principles are discussed. It is recommended that these fundamental principles of fiscal law should be established through amendment of the present legislation (such as the Constitution and the Law on Budget) and enactment of some new legislation (such as a basic law on public finance), and that enforcement of fiscal law and its supervision should be improved and strengthened. It is also proposed that a fiscal division could be established within the court system so that various fiscal disputes could be settled and remedies provided through the judicial channel.