Research On The Reform Of Local Fiscal System In China

Current local fiscal system has been functioning since the 1994's tax—sharing system reform, but there are still many defects and problems in it because of the original shortcomings of 1994's reform. The ratio of fiscal revenues of local governments is declining apparently after the adjust of corporate income tax in 2002, however local expenditure is rising gradually. The imbalance of expenditure and revenue resulted in diverse issues and influences on market economy in devoid of effective fiscal transfer institution. The reform of local fiscal system is ergent in view of its important and essential role in public finance and economic development.This paper starts with the theory of public goods which includes local public goods and national public goods, and compares the providing efficiency of local public goods between central government and local government, and introduces the contents of local fiscal system. Secondly, we finds out the issues in current local fiscal system and analyzes its detrimental impacts on market economy and social development. Thirdly, introduces local fiscal institution arrangements in America, Germany and Japan so as to sum up their experiences and merits for our reform. Eventually, puts forward the suggestions and measures .