A Study Of Local Financial System Reform Of The Divided Tax System

In the recent years, every province have carried out the financial policy of divided tax system in its own administrative region, these actions have been in accordance with the request of the central supervisor to local financial system of the divided tax system. Under this new financial framework, some progress have been achieved, for example, the regional industrial structure are adjusted, and the resource has been optimized and better collocated. At the same time, there are some problems which differ with the socialism market-oriented economy. Those problems have clearly existed in some fields, like the difficulty of county and countryside financial funds. From the point of view of system arrangement, the main two reasons are attributed to these problems. At first, the whole-country financial system is short of a consistent standard and stability protected by the law. The central government only distinguishes two different financial systems between the state and the provinces, so the local governments have their own decision rights about how to utilize these rights according to different practical condition, and so the financial systems haven't a unanimous framework among the different provinces. Because of this very significant difference, it is impossible to compare one with other provincial financial system. Particularly, the financial system and policy have been implemented through the way of the government notice or document, which, at the most, only have the effect of administrative rules, leading to the state financial policy instable. As for the local financial systems, the rules have been changed more often, and the variability are even more great, resulting in or from the local governments' short-term actions and some negative effects. Secondly, the whole financial framework arrangement lack a inner logic or system function unitary. The divided tax system, with its own logical structure, has comprised of a series of the relative sub-systems. The traditional financial system was designed according to the power of financial revenue and expenditure. On the contrary, the divided tax system has been planned on the base of differentiating the government's functions, on the direct condition of distinguishing expenditure and task in the light of responsibility among the government. And so according to this financial system, financial revenue has been confirmed through expenditure and task. And also, transfer payment has been devised by the financial gap of between revenue and expenditure. Under this framework, the rules by which the different governments' rights and responsibility being executed, that is to say, supplying public product, are plotted off. At last, a rigorous financial system, with an inner logical request, has been constructed. However, the Chinese local financial systems, like the grade lump work system of the eighties of the last century and the divided tax system beginning with the nineties of the same century, were put forward under the overwhelming thought of reforming distribution of financial funds and overcoming the shortage of financial funds, and at last mobilizing the local enthusiasm. In this course, a very important macroeconomic guideline was followed, by which more rights and interests were given to the local sections, and the condition of stablishing the later normative financial system was to becreated through reducing reform resistance. On the other hand, the problems, like ascertaining the government's functions, setting off rights and responsibility, haven't immediately been solved. Just because there is not only without a consistent standard and the stability protected by the law, but only without inner logical consistency and system function unitary, some gaming actions of transforming financial burden among the governments must appear and exist in large scale. And then, the pushing down-type and inverse marching-type local financial systems have co-existed, seriously affecting the implementation and efficiency of supplying public product. Especially, the lower is financial section, the less is rights of bargaining, the more centralized is the gaining rights of upper financial section, however, more responsibility and more expenditure are given to the basic financial section. These problems are the main results why the county and countryside financial organizations bear more financial burden and their financial expenditure are beyond the revenue, and why there is no scientific, normative, efficient local financial systems.The next reform of local financial systems is to adjust the past whole system on the base of theory creation, and should not partly adjust it. That needs to co-reform other relative significant aspects, and make the whole progress. A objective mode of the standard, scientific, and rational local financial system should be established according to the inner logical structure of financial framework, strengthening the matching reform of transfer payment and income distribution, and paying more attention to exerting provincial governments' particular role during the reform course of the local financial system.