Study Of China's Western Rural Areas Of Public Finance Reform

Study on reform of public ; for western countryside has been a hot topic in recent years. Since the tax-sharing system reform, the income and expenditure of western counties and villages has kept expanding, which makes the economics further strengthened. However, for various reasons, these counties and villages are still under deficit. There are no formal income resources for necessary public expenditures that can match with social and economic development. These have created serious public financial crisis for financial system of these counties and villages. This makes it extremely challenging for central government to establish relatively developed public financial system for countryside in western China.There are two major issues for reform of public financial system for western countryside: 1) to keep the counties and villages away from deficit by adjusting the system; 2) to balance the financial expenditure and public services level. In fact, these two issues are co-related in such a way that the financial difficulties of counties and villages are the major cause of different basic public products and service levels among different regions.Let's come to the more basis level. The financial difficulties of counties and regional unbalance are only problems that have come to the surface. The reform of public financial system for western countryside should not only be problem oriented, rather longer term targets and relevant evaluation standards should be set. By doing so, we do not run into a situation that only the apparent problems are solved, but more difficult and longer problems are created.From the perspective of operational mechanism of financial system, western China should first define the responsibilities among different level of government. In the financial theory, the responsibility and expenditure of different level of government are divided within the framework of the financial system. In detail, it includes: which level of government has the explicit responsibility of providing public service towards countryside; when there are duplication of responsibility, which level of government should be in charge: 1) draft relevant regulations on service providing and supervise the same; 2) finance for service providing; 3) provide services. Considering the significant impact of finance towards public service providing, this essay pays attention to the basic education system of western countryside. In this aspect, the lack of resources and poor management have been very prominent problems.The cancellation of agricultural tax means less income for governmental finance. To provide sufficient, stable financial resources that also match with responsibility for local government of western countryside, a reasonable tax allocation should be set between central and local governments, a unified tax system for city and countryside should be gradually set up, the western countryside economy should be developed to become more industrialized and more city like for countryside and agriculture industrialized. This reform is not just to mitigate the conflict of income and expenditure, it is more to set long term and effective condition for regular expansion and balance of income and expenditure scale. For most western county and village governments, the major income is from the allocation of upper level government. In the coming period, the major solution for central to local and upper local to lower local financial allocation should be: vertical allocation as a major way assisted by horizontal allocation; structural wise, unconditional allocation as a major way assisted by conditional allocation. In addition, with the allocation scale remain unchanged, the change the structure of the existing unconditional and conditional allocation, gradually expand the equal allocation and special allocation for a particular purpose, diminish the tax subsidy and set up the evaluation system for allocation.Reform of public financial system for western countryside is a complicated system and has close connection with a system framework which is based on setting up of government levels, responsibilities defining of county and village government, balance of government power. It covers supply of public products, local taxation system and allocation system. Hence, the best option is to have a comprehensive and overall reform. However, the overall reform has to adjust the benefit of relevant parties and it is also lack of certain conditions that are needed for the reform. Therefore, the reform at this stage is more of a less perfect and gradual process under so many restrictions.