Regional Disparity Of Fiscal Revenues In China

The development of economy and society in China is moving on fast since the reform and opening up policy was implemented. As a result of diversities in aspects like condition of locations, endowment of resources as well as history and cultures, the economic developments evolve to divergent levels among regions, especially among east, west and middle part, and provinces in the whole country, which largely restricts the stable growth of the economy and harmonious development of the society. Financial capacity reflected by fiscal revenues can mirror the economic strength of a region to some extent. It is pointed out:"We should improve the public finance system to ensure equal access to basic public services and promote the building of functional zones" in the Report to the Eighteenth National Congress of the Communist Party of China on November8,2012. And then in the Eighteen Third Plenary Session in November2013,"Decision to numbers of major issues on deepening the reform overall" restates:"We should promote equal access to basic public services". Thus, not only are reducing regional disparity in revenues and equalizing inter-regional fiscal capacity significant subject towards us currently, but also the way to promote equal access to basic public services.According to this reality, systematic analysis on disparity of inter-regional fiscal revenues is done in this dissertation. Based on the literature review about disparity of inter-regional fiscal revenues in chapter1, I summarize the practice and experience on reduction of disparity of inter-regional fiscal revenues done by western countries in chapter2. In view of the former research, Chapter3explores the status quo and trend of change about disparity of inter-regional fiscal revenues in China, in which regions are defined under different standards including administration, geographic area and Cluster Analysis. In order to reflect the disparity of inter-regional fiscal revenues more completely, I, furthermore, compute the mobility of fiscal revenues among regions. To find the causes for the gap in fiscal revenues, I should calculate the factor shares first, so I specify the contributions of each factor to the overall regional disparity in chapter4by decomposition of the disparity in fiscal revenues, from different sources on projects, industries, sectors and enterprises with distinct ownerships, to per capita fiscal revenue among regions. Conclusion from the research above shows that the crucial factor leading to the disparity of inter-regional fiscal revenues is the sales tax revenue. According to the tax regime in our country, sales tax revenue mainly comes from the second and the tertiary industries, especially the later one. Thus, I investigate the quantitative relationship between per capita fiscal revenue and GDP per capita in the second and the tertiary industries and study the cointegration relationship between inter-regional disparity of fiscal revenues and that of sales tax revenues from real estate which is the mainstay sector to the second industry, and then I identify the main and underlying causes for the formation of the gap in the inter-regional fiscal revenues. After that, on the basis of optimization model of transfer payments effect on central government and local governments, chapter6calculates and assesses the effects of transfer payments from central government to local ones against the disparity of inter-regional fiscal revenues, using Rank Sum Test and Shift-share Analysis. Based on the result from chapter5, we know that the regulation on the real estate sector plays a great role on the reduction of the gap in inter-regional fiscal revenues, and thus, starting from the inter-regional disparity of real estate sales tax revenues, chapter7forecasts the effect on suppressing housing price to reducing disparity of inter-regional fiscal revenues, analyzes the utility change of local government, and discussed the relationship between house price and land finance. The last chapter is several suggestions relative to the content above.In light on the above researches, the main conclusions are as follows:1. Despite of the convergence, the disparity fiscal revenues, existing among regions apparently, is more significant than that of GDP per capita. Within them, the Gini Coefficient of inter-province fiscal revenues nationwide is biggest, while that of inter-province fiscal revenues in the western is smaller but with greatest increasing rate. The disparity of inter-regional fiscal revenues among the eastern, the central region and the western gives the biggest contribution to the Gini Coefficient. The disparity of fiscal revenues from the regions divided by the features on the whole economy and economic structure shows a decreasing trend. The mobility of fiscal revenues among regions is bigger in the long run relative to the short run and the descending order of its size is in the west, in middle region, among provinces, in the east and among the east, west and middle part. Rather than in the west, mobility of fiscal revenues has a positive role in narrowing the regional disparity of that.1. Changes in the Gini Coefficient of the inter-regional fiscal revenues mainly rest with the changes in regional fiscal revenues. Revenues from taxes on sale, the tertiary industry, real estate sector and joint stock companies give the maximum contribution.3. The development of the second industry and the tertiary industry has a significant impact on the disparity of inter-regional fiscal revenues, especially unbalanced development of the tertiary industry is the main cause. As the mainstay sector of the tertiary industry, inter-regional unbalanced development of real estate becomes the deeper cause of regional differences in fiscal revenue in China.4. Current allocation of transfer payments narrows the disparity of inter-regional fiscal revenues to some extent, and this effect will get large with the ratio of general transfer payments increasing, meanwhile the descending order of the effect would be the ones among the eastern, the central region and the western, among the provinces, among the provinces within the eastern, the central region and the western. Although transfer payments improve the mobility among provinces, it solidifies the rank of fiscal revenues of the provinces within the eastern, the central region and the western, which is harmful for the reduction of the disparity of inter-regional fiscal revenues. The current allocation of transfer payments can be optimized on the ground that the distributions of the local level of per capita fiscal revenue and that of per capita transfer payments have no difference. There exists a trend that the province with higher local level of per capita fiscal revenue gets more transfer payments, the one with lower gets less for internal provinces within the eastern, the central region and the western. In the eastern, the situation that the distributions of the local level of per capita fiscal revenue and that of per capita transfer payments have no difference is becoming weak, but it still stronger than that in the central region and the western. Thus, the central government should continue to focus on local allocation of transfer payments; in the whole country and the central region, this trend that although moves in fluctuation decreases; this trend in the western that although becomes weaker than that in the eastern and central region is getting stronger in the recent years, so the central government cannot ignore the rationality of allocation of transfer payments in this area. In addition, financial effort in the east did not bring an increase in per capita transfer payments, while the higher the financial effort gets, the more the transfer payments are in the central and west region. The direction for optimizing the allocation of transfer payments rests with the fact that the central government should increase the transfer payments and encourage their financial effort in multiple ways for the provinces from central and west region, and meanwhile decrease the transfer payments to the provinces from the east progressively.5. Inhibition of residential sales price can narrow regional differences in revenue to some extent, and this effect will be significant year after year. However, Inhibition of residential sales price reduces the utility of the local government, and that means that the amount of increasing utility for local government caused by reduction of the disparity of inter-regional fiscal revenues due to Inhibition of residential sales price cannot be offset by the decreasing utility f caused by the reduction of fiscal revenue due to the price lowering. As a consequence, not only should the central government take suppressing the residential sales price of regions with high housing price as a policy goal in the long run to promote equal access to basic public services and reduce the disparity of inter-regional fiscal revenues, but also subsidize the local government controlling local residential sales price in multiple ways.Innovation of this paper is mainly reflected in the following three aspects: Researching perspective. First, it focuses on the contributions from different industries, various sectors and enterprises with divergent ownerships to the disparity of inter-regional fiscal revenues. Existing researches only involve in contributions on revenues from various projects to the disparity of inter-regional fiscal revenues, but in this dissertation, I further explore the contributions on revenues from different industries, various sectors and enterprises with divergent ownerships to the disparity of inter-regional fiscal revenues, and analyze impact of different sources of income for the region's fiscal revenue differences in multiple perspectives, which can guide us to explore the reasons of differences'formation and their transmission mechanism. Second, the research divides regions not only by administration and geographic area traditionally, but also by the features of economy. Beyond the limitation of geography, this dissertation divides the zones with cluster analysis according to the overall economic features and structures on per capita GDP from different provinces, so it can result wholly on the situation and changing trend of the region's fiscal revenue differences. Third, starting from key factors causing the disparity of inter-regional fiscal revenues, it investigates the reasons and transmission mechanism for the disparity. So far, the literature studying the reasons of disparity only focus on one or some of them like economic growth, industrial structure, fiscal decentralization, population, fiscal effort, economic openness and so on. By the decomposition of Gini Coefficient, nobody try to find out the key factors to the disparity and then the underlying causes for its formation. Fourth, by introducing index of mobility, it can investigate the changes of the disparity of inter-regional fiscal revenues per capita in various regions in the long run. Index of income mobility is a measurement measuring change of the relative position of an individual's income in the society. In this dissertation, it will be used in the analysis of the mobility of fiscal revenues among regions initially, and thus, we can make better judgments on the change of fiscal revenues in various regions in the long run.Researching methods. Exploring the main causes for the disparity of inter-regional fiscal revenues, I employ the panel data model. In the early literature, studying the relationship between GDP in different industries and fiscal revenues, most researchers adopt time series data and normative analysis. The panel data model for investigating the quantitative relationship between local GDP in different industries and fiscal revenues.Quantitative suggestions. Starting from the fundamental mechanism of the disparity of inter-regional fiscal revenues, under the condition that we really understand the causes for the disparity of inter-regional fiscal revenues in China, we can just ensure the policy aiming at the target and then improve the situation that the disparity of inter-regional fiscal revenues is large. In this dissertation, I can provide multiple specific quantitative analyses, which would be a valuable reference in making decisions on the reform of financial reform with multi-dimensional goals for the relative government departments. For instance, in accordance with the research on regional distribution of transfer payments, I provide to increase the transfer payments to central and west region, and encourage their financial effort in multiple ways; through analyzing main cause of regional gap, I suggest to restrain the house sales price, meanwhile subsidize the local government in multiple ways.