The Research On The Equalization Effect Of Financial Transfer Payment In Guangdong Province

In1994, China carried out the reform of the tax system. In order to smoothlyimprove the reform, our country has established the intergovernmental transferpayments system which focused on protecting the tax reform. At the sametime, referring to the transfer payment measures from the center to thelocal and combined with the province’s fiscal capacity and characteristics, everyprovincial government also enacted respective interim rules of transfer payment.Although Guangdong Province is one of China’s most economical and taxprovince, the development of the province is imbalance among regions: southeastcoastal economic has high degree of development, the economy are backward onthe the eastern, western and northern mountainous areas, thus financial gap iswidening. In order to reduce the regional financial gaps, in1996, basing on thecentral transfer payment and the actual situations, Guangdong province promulgated aregulation named “the implementation of fiscal transfer payments in Guangdongprovince”, which indicated the initial establishment of the transfer payment systemfrom the province to the districts. The system has played a positive role in balancingthe financial gap between the cities, but with the deepening of the policy, more andmore practical problems have arose in practice and greatly influenced the actual effectof the financial transfer payment. In this context, it is necessary to study the situationof Guangdong Province’s financial transfer payments.Firstly, on the basis of reading domestic and international scholars’ study on theeffect of equalization of financial transfer payments, the paper collects the data offinancial transfer payments and grasps the situation of Guangdong province. Theunreasonable phenomena of scale, structure and assignment, large internaldifferences and a serious fiscal gap in backward areas have been found. Taking thefinancial equalization into the main points, the paper quantitatively studies the scale,structure and dynamic of Guangdong Province’s financial transfer payments fromoverall and breakdown. The studies show that the equalization is not ideal, and thestrongest financial equalization effect is financial transfer payment, followed byspecial transfer payments and the worst effect is the tax return. Based on the aboveanalysis, the paper proposes policy recommendations for the further optimization topromote fiscal equalization of Guangdong Province’s financial transfer payments.