Research On Governments’ Land Finance Problems

In recent years, national government has adopted the economic model led by local government and characterized by urban expansion. This economic model has made the rapid development of the national economy, and the relationship between land and the local economy is becoming more and more closely. Therefore "Land Finance" has gradually drawn the society’s great attention. Since the tax sharing system reform in 1994, the revenue in local government has declined significantly, while the expenditure is increasing year by year. As extra budgetary, revenue from land sales has greatly eased the pressure on local government finance. Land-related tax revenue and the related revenue gradually become the strong pillars of local government’s revenue generation. Land finance activates the value of State-owned land and brings sufficient funds to local government’s investment. It also speeds up the process of urbanization, and constantly improves the residents’living level. Meanwhile, the resulting problems are looming:forced demolitions and evictions emerged continually; the conflicts between the government and the people intensified; high house prices brought heavy burdens to the low-income families, and the local government financial risk is increasing. However, the land resource is limited, and the rural land can’t be "occupied" endlessly, in the long run, these will eventually affect the country’s sustainable and healthy development of the city’s economy.This paper attempts to analyze the local government finance problems from the angles of fiscal and tax system characterized by the tax sharing system, the local government performance evaluation, and the competition system. By using theoretical analysis, comparative analysis, and empirical methods, this paper gives a comprehensive analysis of the present situation land finance in China and its existing problems. To take Shibei District of Qingdao as an example, it will seek financial models for the sustainable development of the local government’s finance by learning from practical experience of developed countries and regions:to establish the finance balance system; reform the current central and local tax system, rational division of power between the central and local government; change the land sales revenue into property tax to lower the local government’s enthusiasm for land sales; promote municipal bonds and other debt financing to broaden the financing channel; set up and amplify the system of land revenue’s management and reservation and revenue management system to strengthen fund management and operation; reform of the system of local officials’ performance evaluation, and promote economic transformation and upgrading; constraint the behavior of local government expenditures, and spending money wisely.