A Research Of China's Fiscal Power Structure

Fiscal system is the institution of the division of responsibility, power and related interest among the different levels of governments as well as the state and enterprises in the financial management of the state. The establishment of the fiscal system is a matter of historical, political, economic, cultural, social and other factors. It also plays an important role in the areas of the country's economic development, social stability and national unity. From the view of Finanzsoziologie, the fiscal power is the exchange media between the political system and other subsystem of society mainly the economic system and the rules of fiscal power configuration embody in the fiscal power structure. The three decades reform of fiscal system in China has witnessed the process of exchange between the social subsystems by the "power", and the construction of a new social system. After the attempts of decentralization reforms, China set up the "Tax-Division" system in 1994, it re-adjusted the tax revenue allocation pattern between the central and local governments (mainly the central government and the province), and effectively improved the "two proportions". However, China's existing fiscal power structure does not comply with the legitimacy and effectiveness requirements of the fiscal power structure under the market economy. The division of power between the government and the market as well as the government of different levels has been lack of legal bounds, resulting in various fiscal behaviors of arbitrariness and non-normative. Governments bear the substantial economic construction functions, and the existence of numerous state-owned enterprises (SOE) blurred the relationship between the government and business; the higher-level government shifts or dumps financial expenditure downwards because there is no formal, legal assignment of fiscal expenditure power; the lack of a relatively independent status of fiscal power, no legislative power of tax and issuance of government debt, imperfect transfer system induce the local governments to find the fiscal funds to solve local affairs in non-normative ways; the public budget of China can not cover all the fiscal behaviors of the governments of different levels, which is lack of supervision. Therefore, China's current fiscal system is just a distribution of tax revenue but it is difficult to form a stable fiscal power structure which is consistent with market economy. The reason of the study from the Finanzsoziologie perspective which is a branch of the economic sociology is that the majority of the real problem can not be easily classified according to the academic nature. "The Method of Economic Benifit Research" can make the Economics to develop in depth, but limit the reality of the explanatory power of social problems. With the method of the Economics research comparison, Finanzsoziologie analyses the fiscal behaviors and tries to explain the fiscal phenomenon by sociological tradition. From the view of Finanzsoziologie, to combine the Method of Economic Interest Research and the Method of Social Relation Research and to build the concept of fiscal power structure with the "power"-the fundamental factor of social relation is the break of mainstream economics research on the fiscal system in the past. Out of pure economics research method, the Finanzsoziologie provides a broader perspective to divide the state power and social rights, to coordinate the distribution of a variety of benifits and to increase the capacity of self-integration and to promote the political system with other social subsystems. With its own knowledge pattern, sociology must adopt different research modes according to the studies of different nature as well as the different perspective.This paper attempts to research on the fiscal power structure in China with the methods of combination of economic benifit and social relation analysis, combination of dynamic (history) and static analysis, combination of empirical analysis and normative analysis in the logical process of "hypothetical deductive method". On the base of the Structure Functionalism Theory, this paper explains the basic meaning of the fiscal power structure and the related theory by the methods of analysis and synthesis. From the view of the Economics, this paper discusses the standard of fiscal power structure construction with the static analysis method of the fiscal power structure in mature market economy. With the method of dynamic (history) analysis, this paper reviews the evolution path of China's fiscal power structure driven by the "crisis" and analyses the effectiveness and the fiscal power of local governments with the combination of empirical and normative research method. At last, this paper proposes the optimization program of China's fiscal power structure with the comparison of fiscal power structure in the mature market economy.The content of this paper consists of seven chapters:Chapter 1 is the Introduction to this paper; Chapter 2 to Chapter 7 is the main content of this paper. Chapter 2 is the basic definition of fiscal power structure from the view of the Finanzsoziologie. This chapter clearly defines the concept of fiscal power structure and puts forward an effective means of fiscal power structure according to the Structure Functionalism which is the major oriented research of the Economic Sociology. Meanwhile, it builds an evolution path of the fiscal power structure with the production function and reveals the performance of different social development. Finally, Chapter 1 proposes the legitimacy and effectiveness standard of fiscal power structure on the basis of the modern social formation. With the reference of Fiscal Federalism Theory, Chapter 3 puts forward the standard of fiscal power structure in the market economy in order to provide the standard model of the analysis and the optimization of China's fiscal power structure on the perspective of Economic Theory. Chapter 4 expounds the theoretical basis and the evolution path of China's fiscal power structure. The theoretical basis of China's fiscal power structure construction is the China's unique "National Distribution Theory" as well as the principle of fiscal system. China's evolution path of fiscal power structure goes through unified system under the U-organizational structure, the contract system under the M-organizational structure and the tax-division system under the combination of U and M organizational structure. Chapter 5 analyses the lack of the effectiveness of China's current fiscal power structure. With the reference of the market economy's standard, the chaper discusses the main problems of China's current fiscal power structure. There is no clear bound between the fiscal power and the market power as well as the power division among the governments of different levels; and the concentrated revenue power causes the local governments' revenue and expenditure does not match. The current transfer system does not play a coordinating role in the current fiscal structure. Chapter 6 analyses the fiscal power of China's local governments further and comes to a conclusion:the root cause of the lack of its effectiveness is that the local government can not perform the main fiscal function as a relatively independent power body because of no clear defined norms. Chapter 7 tries to optimize the China's fiscal power structure under the market economy. The optimization goal is to establish the relative independence fiscal power agents of local governments and to standardize the fiscal behaviors of local governments by the law form in order to make the appropriate adjustments with the fiscal power. Optimization of the existing fiscal power structure must be in accordance with the logic correct order. The first step is to transform the government functions and develop the market and social intermediary organizations by limiting and regulating the government's power of production resources for the further delineation of the fiscal power border. On this basis, to definite the fiscal expenditure power of different level governments is the second step and the focus is to identify and implement the central government's fiscal expenditure power. According to the division of fiscal expenditure power, the third step is to endow the local government the necessary tax power, and to regulate the power of Treasury Investment and Loan in order to complete the current fiscal function of the economic development. The fourth step is to standardize the existing transfer system with the goal of equalization of local fiscal funds and basic public services and to adjust the proportion of the general transfer and the special transfer based on two equalization goals as well as the related conditions. Finally, Chapter 7 emphasizes two important issues which can not be ignored:one is the integration of China's government budget and hardening the different level governments' budget constraints, another is to build a sound democratic system of local finance in China.Innovations of this paper are reflected in the following three areas:Firstly, the research perspective is Finanzsoziologie which reviewed in western academic in 1970's. Specifically, this paper combines the method of benefit analysis and social relation analysis, analyses the fiscal system problems at the context of macro social and historical development, emphasizes the political, economic, institutional and cultural factors which connectes state and society, studies the generation and development of the government's revenue and expenditure behavior, the evolution of fiscal power and their effects on politics, economy and society etc comprehensively. The paper uses the related thoeries and concepts of Public Economics, Economics, New Political Economics, Fiscal and Political Science in order to study the fiscal power system from a broader perspective. Secondly, the paper builds up the concept of fiscal power structure learning from the main orientation of Economic Sociology, that is, theory of Structure Functionalism. Regarding the concept of fiscal power structure as a subsystem of social system, the paper discusses the interaction between fiscal power structure and performance of social development furtherly. According to the theory of Structural Functionalism, conclusion of this paper is that a legitimate and effective fiscal power structure is a "virtual order" or "institution" which induces the agents of fiscal power to cope with the uncertainty, to play a dynamic role and make contributions to the overall objectives. Only in this "order" or "institution", rihgts can play its role of mutual exchange media of all of the social subsystem. Therefore, according to the characteristics of legitimacy and effectiveness of fiscal power structure in market economy, the objective of optimizing China's fiscal power structure is to establish a relatively independent status of fiscal power agent at all levels of government, make clear of the rihgts division between market and government, between governments of all levels and gradually establish the "institution" through legal form. Thirdly, the paper payes much attention on the unique theoretical basis of China's fiscal power structure, that is, "National Distribution Theory"and "Principle Theory". Based on the U and M organizational structure in Industrial Organization Theory, this paper depicts the evolution path of China's fiscal power structure from "Unified System" mode to "Contract System" then to "Tax Division" mode.