The Study Of Fiscal Systems With Unified Powers And Responsibilities In Counties And Countrysides

Since 1994 when the reform of system of tax distributionin fiscal management system took place, the intergovernmental fiscal relations had gone on the right track. The fiscal situations in counties and countrysides are less satisfying comparing with that of the central government and provinces because of the widening gap between incomes and expenses. This disadvantage has left adverse impacts on public products, public services and governmental regulations. This essay aims to research on several aspects including basic financial situations in counties and countrysides, problems involved, possible causes, theories on fiscal systems,developed countries experiences and etc.A. The importance of the study on fiscal systems of counties and countrysidesAuthorities of counties and countrysides play essential roles in the system of administrative control in China for they are regulating over half of the population lives in China. They are also irreplaceable in terms of providing public products and services. The core of their fulfilling responsibilities, which are fund raise and financial allocation, lies in the construction of fiscal systems. The construction will also directly affect the level of public products and services provided by counties and countrysides. A popular saying derives from practical work depicts the different financial situations in different classes.On one hand, fiscal situations of counties and countrysides are essential to the functioning of the publicfinancial because it provides public services and products to rural areas. On the other hand, they are the key to the integration of urban and rural areas. China’s,the central government’s especially, financial accumulation increases at a higher speed. At the same time however, the higher authorities always take the upper hand and distribute their responsibility to lower governments when they are not ready to take on tasks beyond their abilities. The burden, thus, becomes increasingly heavier, the gap increasingly wider and the debt increasingly overwhelming. The core to solve this problem is to analysis current situation and come up with a reformed system base on experience borrowed from developed countries and on specific regional and national issues.B. The current situation and problems of China’s fiscal system of counties and country sides.There was no clear distribution of responsibility within the financial system before 1994.After that the system is refined and the responsibility was divided according to abilities, and intergovernmental transfer payment system was initiated.Since 1994, reforms took place including the reform of rural taxation system and several others to clarify the share of duty. Optimistic result gained while problems surfaced. For example, the burden alleviated from farmers by the reform also decreased the local financial income, which widened the gap between income and expense. The improved efficiency achieved by the reform caused deepening inconsistency between governments and the authority was challenged over and over again.This essay points out the problems exist in the system by introducing the current situation of post reform time and comparing statistic over the years. The problems includes the imbalanced accessibility of human and financial resources, the growing gap between income and expenses, the imbalanced development between different areas and etc.C. The theoretical foundation and borrowed overseas experience in the fiscal system of counties and countrysides.The experience borrowed from overseas countries would provide good examples for our reform of fiscal system and budget system. Therefor, analysis is made on developed countries such as the U.S., Germany, Japan, The U.K. and Russia. The conclusion drawn from above examples is that clear distribution of responsibility should be announced, the transfer payment system is to be refined and censorship is to be more transparent to evaluate the level of income and expense with more accuracy.The following theories are used for the research: The public organization structure theory,the decentralization of authority theory in finance, the principal-agent theory and etc. The above theories opens our eyes to new and different angles to address our current problem.D. The propose of setting up unified policies on the fiscal system of counties and countrysides.Based on the analysis given before and introduction of overseas examples, a proposed is made in terms of uniting the responsibilities of fiscal system. First, the main idea is to clear the outline of distribution of responsibility, which includes classify different classes, make adjustment accordingly and keep the principal of unity at core. Second, expense responsibility is also to be divided. This means the responsibility of complete exclusive public service,incomplete exclusive public service and expenses of short notice should be separated. More detailed sub-devisions should also be available. Third, A stable secure system is to be set up for financial accumulation. Lower authorities should be empowered for the management of their own taxation, property tax should be addressed as the main tax, and all kinds of income should be cleared and managed. Fourth, parallel reforms should be taken place to strengthen the power of local authorities. The democratic political reformation on basic level should keep up their pace with the central government.E. The innovation and deficiency of this essay.One innovation is proposing the idea of classifying different budget stages. This essay made the suggestion to amend the currentConstitution andBudget Law to reconstruct the budget system. Province authorities will continue to have direct power over more developed counties and countrysides with less area to weaken the power of city authorities. For larger areas which finance mainly depends on central cities, they are under the radiation of central cities and the radiation could be shrunk to make management easier. Another one is empower the local authorities to reform their own fiscal system. The local authorities knows their people better than anyone else. Therefore, they have absolute advantage in terms of managing their local business and serving their people. The power should leans to those who has better abilities.Deficiency:First is inadequate statistics. Materials are quite difficult to access and statistic are insufficient when comparing data in fiscal systems during the research. Therefore,the latest changes might be left out in the essay. Secondly, this essay could use more angles.The fiscal system of counties and countrysides is more than a issue of economy, it also involves democracy, especially on the rural area level. Each decision made on public products and fundings should be notified by everyone living in that area. However, the focus is the fiscal system rather the democratization process of those areas.