Equalization Effect Analysis And Countermeasure Research Of China’s Transfer Payment

Along with the advancing of the tax-sharing financial management systemreformation, China’s intergovernmental fiscal transfer payment system generates. As abudget adjust system which aims to deal with intergovernmental fiscal relations, fiscaltransfer payment system has been given the historical mission of making up localgovernment financial gap and balancing regional fiscal capacity since the beginning ofits establishment. And balancing regional financial resources and promoting theequalization of basic public services among regions have become the fundamentalobjectives of the transfer payment system. The report of The Chinese CommunistParty’s eighteenth congress clearly pointed out: From the height of safeguarding thefundamental interests of the overwhelming majority of people，We must speed up toimprove the basic public service system, strengthen and innovate social management,and promote the building of a harmonious socialist society. However, the status ofChina’s regional economic development shows that China’s regional economicdevelopment gap and fiscal capacity differences are still relatively large, financialtransfer payment horizontal financial equalization effect remains to be further realized.Thus, studying on the role of horizontal financial equalization the current system oftransfer payments has played and then taking appropriate measures to enhance itsequalization effect to promote the equalization of basic public services have become anurgent issue to be addressed.On the basis of combing mainly theoretical research on equalization of basic publicservices at home and abroad，This article firstly introduces the theory of Public Financeand Welfare Economics to proof the necessity of intergovernmental fiscal transferpayments in achieving equalization of basic public services, then empirically analysesthe lateral financial equalization effect of the transfer payments combined with regionaldifferences in the level of fiscal revenue and expenditure. On this basis, this articledeeply analyses the factors which influence the equalization effect of fiscal transferpayments. Finally, this article gives some countermeasures and suggestions ofincreasing transfer payments equalization effect on the basis of referencing theadvanced experience of the transfer payment abroad. This article is divided into fiveparts. The first part is Introduction, including the background and significance of theresearch, review of domestic and foreign research, research methods and content as wellas innovation and deficiency of the papers. The second part is theoretical analysis of transfer payment equalization. This part firstly introduces the content and objectivessystem of transfer payments，the core objective of transfer payments is the regionalequalization of basic public services. The realization of basic public servicesequalization is built on the equalization of regional government fiscal capacity. Thus theequalization of transfer payments in this article is defined as equalization of regionalfiscal capacity after the transfer payments. Then the article describes the theoreticalbasis to achieve transfer payments equalization from different angles. From the "public"angle of the finance, the Public Finances Theory points out that government shouldprovide the community with roughly equal public goods and services for everyone. TheWelfare Economics Theory which is represented by Pigou deems that the balancedallocation of the social product or not directly influences the total social welfare.Therefore they conclude that government must adopt appropriate fiscal measures tobalance the allocation of social resources between different groups to promote socialwelfare; The New Public Service Theory emphasizes the change of government’sfunctions from helming to servicing, they emphasis on the public nature of governmentservices, which is oriented to the needs of the public and regards the public service asthe basic purpose. On the basis of the protecting social democracy, governments shouldtake providing public goods and services to meet the public needs of society as itsultimate aim; Fair and Justice Theory suggests that equality and freedom of society andequality of opportunity constitute the basic framework of the society. Thus theopportunity of enjoying public goods and services government provides should be equal;Fiscal Decentralization Theory deems that local governments have more informationsuperiority in the provision of local public goods and services, thus in the case of ashortage of local financial resources, enhancing the lateral equalization effect of thetransfer payments is particularly important. The third part is analysis of equalizationeffect and influence factors of China’s current transfer payments. This part mainlymeasures and comparatively analyses the overall equalization effect of the transferpayments as well as the equalization effect of various sub-item transfer payments withsome related econometric models and related statistical indicators, by which we foundthat China’s transfer payments have played a role of horizontal financial equalizationeffect though it is limited. The equalization effect of the tax return is the weakest andeven playas a role of inverse equalization effect, the strongest is the effect of financialtransfer payment, and the effect of special transfer payments in the middle. The reasonsof the limited equalization effect of transfer payments not only involve aspect of the design and operation of its system, but also relates to the unclearly division ofintergovernmental fiscal capacity and expenditure responsibilities. It is more closelylinked with the fiscal expenditure structure guide in governments at all levels. Thefourth part is the experience and inspiration of foreign transfer payments. This sectionmainly introduces advanced experience from which we can learn of transfer payment inAustralia, Germany, the United States and Japan. The fifth part is countermeasures andsuggestions on promoting China’s transfer payment equalization effect. This sectionpresents the idea of improving our financial transfer payment system and enhancing thelevel of equalization of basic public services, the idea covers two aspects as perfectingthe transfer payment system and improvement of other supporting mechanisms. On onehand, we should improve the current system design and operation mechanism oftransfer payment, The most important thing we should do is to optimize the form oftransfer payments, cancel tax return which doesn’t play equalization effect and integrateit into the general transfer payments for regional balanced distribution; Perfect generaltransfer payments which plays an important role in equalization effect, increase itsproportion in total transfer payments; Standardize special transfer payments to promotethe further playing of it’s equalization effect. At the same time, we should rationallyplan the allocated direction and fields of transfer payment funds. Make sure that it ismore inclined to the central and western regions, and basic public services. On the otherhand, we should improve other related supporting mechanisms, we should learn fromforeign advanced experience of the transfer payment system in this respect. Including:Reasonable dividing expenditure liability of government at all levels, Strengthen thesupervision and management and legal system construction of transfer payments and soon. Guarantee the smooth and effective implementation of the financial transferpayment system, and ensure the further realization of equalization of basic publicservices.