Research Into The Local Government Financial Difficulty Of The Nanjing National Government Period

In 1928, Nanjing National Government convened the first national financial conference, the resolution decided to divide the revenue and expenditure between central and local governments in order to form the two-level fiscal system. This system has a significant system defect, for the division is only limited within the central and province governments without referring to the province and county, which hide danger for the later centralization of province power. When the national government abolished likin while the new levied business tax was unable to fully compensate the corresponding loss in 1931, the fiscal revenue of local governments fell in jeopardy. The province governments began to collect all of the staple items of taxation which belonged to the local governments; the county governments could only get 20% to 30% as expense of taxation. However, as the first level of the fiscal system, county governments had the obligation of administration, education, social security and health. In order to conquer the fiscal difficulty, the county governments began to raise the rate of land additional tax, which marked the beginning of prevalence of exorbitant taxes and levies.While the defect of this two-level fiscal system should take the prime responsibility for the financial difficulty of the local governments, three other special factors should be noticed. Firstly, during the period of transformation of modern government function, or more specifically, the period of expansion of government function, the failure in reasonably arranging the progress of undertakings according to the actual available financial resources would easily put the local governments into financial jeopardy. Secondly, the ten year's civil war between the communist party and the Kuomintang not only severely damaged the local governments'financial revenue, but made the local security fee a heavy burden. Thirdly, the separatist warlord regimes exacerbate the problem.In 1934, finance minister Kong Xiangxi convened the second national financial conference, after the conference, the ministry of finance took the following measures to solve the local financial difficulty. Firstly, issuing the system law of financial revenue and expenditure which explicitly divided the revenue and expenditure between province and county governments and vest county governments legal status. Secondly, rationalizing the affair and economic rights between the central and local governments, e.g. allocated the alcohol and tobacco tax which was a part of business tax to local governments and made the central government responsible for the justice fee which belonged to its affair rights. Thirdly, urging the local governmenst to reform undesirable tax system. Fourthly, considerably increasing the financial subsidies to local governments. With all these comprehensive measures, the financial difficulty of local governments had been greatly improved before the War of Resistance against Japan broke out in 1937.As far as this thesis is concerned, the experience in the period of Nanjing National Government provides several ways that can be referred to when we are trying to solve the present local governments'difficulty. Firstly, the decentralization of authority between the central and the local should be a three-level system and correspondently, the reform of administrative levels is necessary. Secondly, the division of financial revenue and expenditure between central and local governments should be legally fixed explicitly so as to restrain opportunism action. Thirdly, the division of affair and economic rights should be guided by matching principle. Fourthly, the lack of local governments'main taxation should draw due attention. Fifthly, the experience of financial subsidies between governments should be used as a source of reference.