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 is still many defects and problems in it because of the original shortcomings of 1994's reform, and below the provincial tax system between all levels of government reform objectives is far from being achieved. 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. to a large extent restricted the functioning of local government and local economic development. Therefore, the following study the local financial reform has an important theoretical value and practical significance.This paper based on the theory of public goods, the theory of public choice, theories of fiscal decentralization, and introduces the contents of local fiscal system. Secondly, we find out the issues in current local fiscal system and analyzes its detrimental impacts on market economy and social development. Thirdly, by reference to the United States, Germany and Japan where the successful experience of the financial system reform in China, and combined with the practice of local fiscal reform, puts forward the countermeasures and suggestions of the financial system in place to differentiate clearly: Clear distinctions between local governments at all levels and spending power; Establishing the dynamic adjustment of the local government revenue sharing mechanism between, Perfecting local financial transfer payment system, Optimal fiscal hierarchy, Reforming and perfecting the system of local financial supporting measures.