Decision of the State Council on Operating the Tax Sharing-based Fiscal Administration System
Decision of the State Council on Operating the Tax Sharing-based Fiscal Administration System
Decision of the State Council on Operating the Tax Sharing-based Fiscal Administration System
Guo Fa [1993] No.85
December 15, 1993
People's governments of all provinces, autonomous regions and municipalities directly under the Central Government, all ministries and commissions of the State Council, and all agencies directly affiliated to the State Council,
In accordance with the decision of the Third Plenary Session of the 14th Central Committee of the Communist Party of China, the State Council has decided to reform the current local fiscal responsibility system beginning from January 1, 1994 and run the tax sharing-based fiscal administration system instead among all provinces, autonomous regions, municipalities directly under the Central Government and cities separately listed in the State plan, to further clarify the fiscal distribution relationship between the central government and local governments, better play the functional role of the national finance, strengthen the macro-regulation capacity of the central government, facilitate the formation of the socialist market economy regime and promote the sustainable, rapid and healthy development of the national economy.
I. The tax sharing system reform is an objective requirement of the development of the socialist market economy.
A reform of the financial administration system is an important component of the economic system reform. The current fiscal responsibility system has played a positive role in the past economic development. However, along with the growing role of the market in resource allocation, its drawbacks have become increasingly prominent in major aspects as follows. First, its weakened function in tax adjustment has had a negative impact on the formation of a unified market and the optimization of the industrial structure. Second, the State's relatively decentralized financial resources restrain the reasonable growth of fiscal revenues, and the decreasing weight of the central fiscal revenues, in particular, weakens the central government's capacity to regulate the macro economy. Third, the fiscal distribution regimes are too diversified and are not standardized. As a whole, the existing fiscal system is inadequate to suit the needs of developing the socialist market economy and thus needs to be reformed as soon as possible.
In the light of the basic requirements of instituting a socialist market economy system and learning from the successful practices of foreign countries, it is necessary to carry out the tax sharing system reform in order to clarify the distribution relationship between the central government and local governments. The principle and main content of the tax sharing system reform are as follows. The scope of fiscal expenditure of different levels shall be determined reasonably in accordance with the division of administrative powers between the central government and local governments; under the principle of matching the administrative powers with the financial powers, taxes are classified into three categories, including the central tax, local tax and tax shared by the central government and local governments, and a central tax regime and a local tax regime will be established, whereby tax is levied and administered separately by two sets of tax authorities, namely the central tax authorities and the local tax authorities; the amount of local revenues and expenditures will be assessed in a scientific way, and a relatively standardized system of tax return and transfer payments from the central government to local governments will be phased in; a tiered budget system will be established and improved, and limits on budgets of different levels will be tightened.
II. Guiding Thoughts for the Tax Sharing-based Fiscal Administration System Reform
1. Appropriately handle the distribution between the central government and local governments, motivate both the central and local governments, and promote reasonable growth in the country's fiscal revenues. On one hand, give consideration to local interests and inspire local governments to be committed to economic growth and increase revenues but decrease expenditures; on the other, gradually increase the weight of the central fiscal revenues, enhance the central financial resources to a proper extent, and solidify the central government's capacity to regulate the macro economy. To this end, the central government shall make more gains, to a proper extent, from the increased fiscal revenues in the future, to ensure the steady growth of the central fiscal revenues.
2. Rationally adjust the allocation of financial resources among regions.
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