| The governmental finance owns distinct and inherent level. The financial relation between governments includes two aspects, the one is between central government and local and the other is between local governments. With the establishment and maturity of market economic system in our country, government plays a more and more important role in adjusting economy, supplying public product and so on. The social division of labor between governments is more and more clear. The authority and financial power relation between governments develops into an important factor which could affect the administrative efficiency of government. So, the research into the financial relation between governments has become a significant subject of government economics and finance whether in theory or practice.This thesis sets off the research in the following nine aspects.1, The analysis of logic starting point of financial relation between governments。 It carries out an analysis of financial origin, development, activity, attribute, evolution of financial relation between central government and local, pattern of governmental centralization and distribution, etc, in theory and authentic proof, which is regarded as the theory basis and logic starting point of the thesis.2, The analysis of authority and financial power relations between governments and mutual relations。 Firstly, it introduces the evolution history of governmental function in our country since founding of the PRC, the governmental function under market economic system and the future change direction of governmental function. On one hand it admits the market's importance, market is the master key to efficiency so it's also the master key to improving the international competition capacity and guaranteeing sustained growth in economy, on the other hand, the governmental function should be defined in accordance with the characteristic and development level of socialist market economy in our country. Secondly, it analyses the basis, principle, content of differentiating between authority and financial power and transfer payment, etc, under the market economy system, and thus leads to the conclusion that the authority andfinancial power should be reasonably distributed on the principle of unifying authority with financial power, the present single longitudinal pattern of transfer payment should be turned into interplay of longitudinal and horizontal with putting emphasis on longitudinal, to refine the transfer payment system between governments in our country. Finally, it sets the direction of authority and financial power reforms, which is to use the successful experience of other countries for reference that adhering to legal principle of differentiating between authority and financial power and according to the tax allocation to standardize by adopting course of law.3*. The analysis of transfer payment system and coordinating, checking and balancing between governments <> On the basis of analysis of coordinating, checking and balancing between governments in our country, it makes a composite discussion on choice of transfer payment pattern, fundamental principle, and scientific arrangement and so on. The basic channels to realize the two-way balance between governments: (1) to divide authority and financial power between central and local government reasonably; (2) to set the aim of transfer payment properly; ( 3) to divide the tax authority and limit of authority effectively, to refine local tax system; (4) to enforce the standardized financial transfer payment system 0 The current transfer payment system was set up on the basis of putting the system of tax allocation into practice in 1994.1mperfections are still unavoidable. The important point of further improving transfer payment system is to standardize the pattern of transfer payment and define county-level finance as the target of transfer payment. To set up the scientific transfer payment system should follow the principle of promoting efficiency as well as giving consideration to fairness, the principle of justice and transparency, the principle of merit, the principle of law and the principle of combim'ng stability taken as leading with flexibility. In the light of these principles, it should choose a suitable transfer payment pattern, merge the current great variety of general transfer payment, standardize current specialized subsidy, and improve the conditional transfer payment system; define the reasonable and appropriate scale of transfer payment as well as control the gross amount to improve the self-supporting ratio; standardize th? distribution way of transfer payment, replace "cardinal number" with-"divisor", reduce randomness and increase science to improve the standardized level oftransfer payment.4> Main theory of financial relation. This chapter mainly introduces some western famous finance experts' theory such as Musgrave theory of financial relation between governments, some economists such as Oates, Lawson, Samuelson theory of "finance federalism", Tiebout "C *M theory of financial relation, G -J ?Stigler theory of dividing authority, J 'Buckanan theory of "club", and economists such as C *F "Bastable, Seligman, John ? F ? Due theory of dividing central and local governments' income and expenses, to seek the theory basis and successful experience for scientific design of financial relation in our country.5^ International experience of regulating financial relation 0 This chapter takes USA, German, Japan, France, India and Russia as target of study, because among them, there're both federalism country and monotony country, both more centralized country and more distributive one, both advanced and developing , moreover, there's country which experiences a change from a socialist planned economy to a market one. It tries to analyze differentiating between authority and financial power, dividing income and expenses, transfer payment system, etc, and search out the common rule and draw references from them. What is concluded from the analysis is that centralization and distribution are common problem, level-to-level finance is the basic trend of fthe financial relation change, tax allocation is the basic form of financial relation , transfer payment system is the longitudinal and horizontal finance balance mechanism.6^ Analysis of evolution history of financial relation in our country o It mainly introduces the mechanism evolution history of financial relation since founding of the PRC. It's divided into three stages: The first stage is from the founding of the PRC to the Third Plenary Session of the Eleventh Central Committee of the Party. This stage takes the "unified income and unified expenses " as main pattern, as the situation develops, it also adopt "define expenses on the basis of income and no change in five years" and "income hook, total amount divided", etc, to extend the local finance's powers, however, central government still controls the finance; The second stage is the planned commercial economy period. It adopts the way of contracting for, to further extend the local finance's powers and give full play to the financial initiatives of local ; The third is from the structural reform of finance and tax taking the tax allocation as trend. By reasonablydividing central and local governments' authority and financial power, it further defines the interest distribution relation between central and local. After analyzing, it defines the direction of tax allocation reform: making further distinct division of central and local authority, reasonably dividing both powers on income and expenses, perfecting financial transfer payment system, entrusting local with the tax legislative power and so on, to improve the financial system reform and further give full play to the financial initiatives of governments at every level.7> Analysis of aim and trend of adjusting financial relation in our country ? It discusses mainly on basic principle , aim and trend and factors for realizing the aim. To adjust the financial relation should follow four basic principles: (1) adhere to giving full play to initiatives of both central and local; (2) adhere to adjusting reasonably the financial power distribution between areas; (3) adhere to combining the unification policy with level-to-level administration; (4) adhere to combining complete design with gradually pushing. It combines practice of our country with experience of other countries to point out that the adjustment of financial relation should take further improving tax allocation and level-to-level financial system as basic aim and trend, and reconstruct the tax system of central and local. At last, it analyzes the factors concerned about realizing this aim, and points out that the regulations of tax authority division which conflict with constitution should be cleared up; to entrust local with the tax legislative power and to divide reasonably the limit of authority of collecting and managing taxes.8^ Analysis of operational situation of current local finance in our country.. This chapter analyzes operational situation of local finance at provincial level, local finance at county-level and local finance at town-level from three aspects, which is whether finance at every level owns reasonable and sufficient income source, whether financial income at every level could meet the normal expenses need of local government, whether the locating responsibility and deploying duty of local finance is reasonable, and whether the normal and reasonable deficit of income and expenses of local government could be covered by superior government. Moreover, it analyzes the main problems and causes of local financial operation. From the mechanism aspect, the cause are as following: the structure of current governmental authority does not coordinate with current tax allocation of financial system; imperfections of tax allocation of financial management system and the financial distribution relation between governments at every level do notup to standard; the relationship between central government and local government has not been straightened out; the local government's function has not been standardized and defined; the unified financial expenses rules can not meet the requirements of actual expenses of every area with unbalanced economic development; it's lacking in proper governmental investment and capital circulation system; the more scientific transfer payment system has not been set up, etc. From the economic aspect, the main reasons are unbalanced local economic growth and low economic returns; the local financial income drops off and growth potentiality also comes down as well as the gap of local economic development is widened, etc.9n Analysis of idea of adjusting financial relation in our country <> After carrying out above analysis of evolution history of financial relation, transfer payment system and coordinating, checking and balancing between governments, aim and trend of adjusting financial relation, operational situation of current local finance and so on, what's more, using the successful experience of other countries for reference, it puts forward the main idea of adjusting financial relation in four aspects: (1) to adjust governmental levels and administrative resources by a big margin, give thought to the proper reduction of local governmental levels and simplify the administrative structure to improve the financial efficiency; (2) to adopt the transfer payment system of interplay of longitudinal and horizontal with putting emphasis on longitudinal, push the establishment of standardized transfer payment system under the provincial level, set up a authoritative management institution of transfer payment and improve the lay system of financial transfer payment; (3) on the principle of "political authority at one level, authority at one level, financial power at one level, tax at one level, budget at one level, property ownership at one level, creditor's rights at one level, to refine transfer payment from top to bottom and further reforms of the local financial system in order to improve the level-to-level financial system on the basis of tax allocation system; (4 ) to establish the precaution mechanism for local financial risk.
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