Construction Of Fiscal System That Can Ensure The Local Finance

In China, the local finance has been in serious trouble since 1990s.The operation of local finance not only restricts the implementation of the functions of local government, but also affects the operation of upper finance or central finance. In China, the research on the issues concerning agriculture, countryside and farmer would become incomplete in the absence of the research on local finance. The reason is the lag of construction of fiscal system. So, the solution of the problem is fiscal system innovation.Chapter 1 :Starting from the current development of local finance in China, basing on the theory of public finance in market economic ,the article firstly defines the functions of the local government, which is the logical starting point of the research. It's because that many problems in the operation of local finance can be found in the disordered functions of government. The article divides the local governments into middle governments and grass-root governments through the comparison among three representative definitions of governments at home and abroad. According to this classification, the article illustrates the current governments at different levels and the characteristics of their functions.Chapter 2:According to that function of government is the premise of the positioning of finance,the article defines the basic functions of local finance through the analysis of the rationality and necessity of its establishment in both logic and practice. Basing on the definition of fiscal system, the article illustrates the meanings and characteristics of fiscal system in China and analyzes its system deficiency.Chapter 3:This chapter selects three countries including U.S.A., Japan and Germany as study objects, analyses and compares the features of settings of local government and fiscal system in these countries from the views of division of business duty and expenditure duty, tax allocation and transfer payment system among governments, then shows the enlightenment for China. The enlightenment includes: to standardize function border among governments in law, to conform business duty in accordance with fiscal power for governments at different levels, to establish local taxation system and so on.Chapter 4:Construction of fiscal system that can ensure the local finance. Firstly, the paper shows that local finance should be entity finance to accommodate market economic. The tax system should be one that tax revenue constitutes its primary part while non–tax revenue constitutes the supplementary part. And the government should establish fiscal system of transfer payment and supervision system at the framework of public finance. Then the article shows that the function of local government is to supply public goods and services needed by its residents. Logical analysis shows that efficiency is optimal when local public goods are supplied by local finance. And the practices of establishment and development of local finance in China also shows that local finance plays an important role in solidifying rural regime and supplying suitable public goods and services to the residents. This chapter is based on the theory that the functions of finance can remedy market failure and meet public needs. Then it brings forward the conclusion that function of local finance is to supply public goods and services to meet its residents'public needs including social insurance and public safety. Corresponding measures to construction of fiscal system the article puts forward the corresponding measures including the reform of the administration management system, transformation of function of the governments and mind of financial management, and establishment and improvement of financial law system and so on. At last, the article puts forward some policies for the adjustment: to redefine the responsibility on fiscal expenditure on rural compulsory education, to increase fiscal expenditure on rural public health cause, to increase fiscal investment in agriculture to strengthen its status in national economic, to increase the expenditure on social insurance to establish rural social insurance system.