The Institutional Analysis Of Chinese Government Transfer

For the demand of the construction of market economy mechanism, Chinese government carried out the reform of tax system to divide the tax income between central government and local governments in 1994. However, influenced and confined by many factors, we did not set up the corresponding formal transfer system between governments. In order to deal with relations of all the governments at different levels, and make them implement their responsibilities more successfully and provide public services more effectively, the reform of transfer system has to be performed immediately.Starting from theory of financial rights division, the analysis of separation of disbursing function between central government and local ones and the revenue resources of local governments used to fulfill their payout responsibility is stated in detail. Then the importance of supporting local authorities through transferring is put forward. Later several important experiences concerning the construction of formal , transfer system is summarized from the check and analysis of division of disbursing function and tax income and the transfer system in U.S.A, Japan, UK as well as Germany. At last attention is drawn on problem of how to set up our transfer system. After the analysis of above related aspects in current China, many suggestions are brought forward.In practice, besides central government, there are one level or multilevel local governments, so, "unitary government" is just a concept in theory, hi theory of financial rights division, it takes for that the central government should be in charge ofdistributing and stabilizing function, meantime, there are division and cooperation between central government and local ones when considering resource collocating. Based on efficiency principle, effective supply of government services request government to fulfil taxpayers' needs and preferences as possible as they can. Then, within benefit range of public services, let government of lowest level offer public services which is the best mode ensuring effective supply. However, simple classification of public goods is not enough to distinguish function limit of each level government. Thus, when functions and incomes can not be peer to peer, or local governments encounter fiscal gap inevitably, we need more detailed distinction to ensure the rationality of function that local governments take on, and we need transfer payment to realizes upright equilibrium and horizon equilibrium, ensuring inhabitants in different areas can enjoy fundamental or approximately equivalent public services. The reform of transfer system in China must not be confined on itself. The reform should start from the basic principle "function choosing income", perfecting system foundation of transfer firstly which means ensuring the definition, stability and rationality of function division. Then, it is possible to bring forward relevant reform suggestions.