The county and township fiscal system is the fiscal system foundation in China. Its revolution condition directly relates the basic unit of political power to be consolidated, rural economic development and social stability. Since 1994 tax distribution system reform, the center financial revenue has additionally received. On the contrary, the local fiscal system, especially in the county and township level fiscal system, is more and more difficult. At present, a series of action have taken to alleviate the county and township financial difficulties. The question has not been eliminated. The resilience possibility is to exist.This paper analyzes the background, evolution of China's county and township level fiscal system from the actual national condition. It also discloses the practical problems consisting in fiscal system in the county and township level. It tries to give the account of financial difficulties that the county and township governments are facing and concludes some feasible policy suggestions.First, the paper introduces the county and township level fiscal system reform before tax distribution system reform from different point of views: background, contents, and perspectives of conclusion. Afterwards it gives out analyses on the impact of tax distribution system reform to the county and township level of fiscal system and redefines the function of the county and township level of fiscal system. Second, this paper investigates gross revenue and expenditure relates to China's county and township governments as well as its structure. The conclusion from such investigation shows that although fiscal expenditure function is going stronger, the revenue is wearing off after 1994 TDS reform. A basic conclusion is drawn that the county and township level financial status has been in great trouble, with the prevalence of delayed payments of salaries, the financial revenue and expenditure contradictory and local governmental financial crisis. Finally, the paper emphatically analyzes the reasons of financial difficulty in the country and township level system, concludes some feasible policy suggestions in the end.The reason leading to the county and township fiscal dilemma in China is complex and diverse. The most direct root cause of the difficulty lies in incomplete and unreasonable financial system. First, the current 5-level fiscal systems have many weaknesses, which the redundancy of governmental fiscal hierarchy blurs the borders of duties and obligations among various governments, resulting that the income right centralizes in the upper governments while the duties and responsibilities in the lower governments. The excess of governmental levels and frameworks makes that tax distribution is insufficient in various government. Second, the implementation of tax distribution system in China in 1994 is a landmark to the fiscal reform from the administrative separation of powers to the economic ones. But this may attribute to the imperfect the county and township governmental fiscal systems, in which deficiencies exist in the assignation of duties and obligations, the allocation of fiscal capitals and the subsystem of transfer payments.The key solution lies in regulating financial relationship among different government levels and promoting innovation of public financial system. This paper proposes reforms, promoting the system of"the provincial government supervises the county government"and removing two government levels of villages and towns. The present five government levels could be reduced to three, which correspondently form three levels of financial system. The distribution of duties and taxation right could be designated according to 3-level government hierarchy. The distributions of duties and taxations right could be designated according to the 3-level government hierarchy. Moreover, a regular local transfer payment system needs to be established. The history debt in the county and township governments can be cleaned up and the increasing debt can be controlled to alleviate financial difficulties in the county and township level fiscal system. |