A Study On The Equalization Of Horizontal Finance In China 's Intergovernmental Transfer Payment

The system of transfer payments between governments was established as a complementary measure when our country began to implement the management system of tax-sharing in 1994. The fundamental purpose of intergovernmental transfers is to achieve the equalization of basic public services in all regions. The central government expects to reach a state that citizen in whole country are able to enjoy the same level of public goods and services. The financial capacity of local governments is a condition that different regions achieve the equalization of pubic goods and services. In this paper, we calculate the financial capacity of local governments before and after they accept transfer payments form the central government first, then we compare the changes of local governments’ financial capacity to analysis the central government’s level of equalization.In the first, we describe the changes of intergovernmental transfers’scale and structure from 1994 to 2014. Then we calculate the coefficient of variation of per capita fiscal income and per disposable financial resources from 1997 to 2012. Compare these two values to analysis the effect of financial equalization. In the last, we test the effect of financial equalization by using the data of 2008-2012 with the method of regression analysis. The results show us that:at the present stage, the intergovernmental transfers are not specification in system; the tax return still exists as a form which maintains the interest of local governments; the special transfer payments is inappropriate in using; the scale of the financial transfer payments need to expend in the future. If we analysis the effect of intergovernmental transfers, we find that the intergovernmental transfers have a certain effect on narrowing the financial disparity of regions, but different regions have different effects. The financial disparity of different regions is not completely broken.So we should perfect the system of transfer payments not only in its scales but also in its structure of distribution. So that can we achieve the aim of financial equalization and public goods and services in all regions.