Analysis On The Equalization Effect Of Fiscal Transfer Payment In Xinjiang

The central government, in order to realize stable economy and a coordinated economic development in society, adopted transfer payment in 1994 as to narrow the income gap among local governments and to offset efficiency loss caused by financial spill-over among different local administrations. As a major means of macro-economic control and financial funds allocation, the central government started transfer payment based on complete tax reform to clarify respective revenue sources between central and local government through defining administrative and financial powers of local governments on different levels.The imbalanced regional economies in China, as shown in the gaps between eastern regions and the west as well as among different regions in terms of basic public service, worsened the balance between economic fairness and benefit. Therefore, an equalized transfer payment became a heatedly discussed difficulty in socialist market economy. Xinjiang faces both deepening gaps with central and eastern regions and among its own local districts as a result of scattered resources and policy orientations for different districts. It is of practical significance that the year 2005 witnessed the central government's proposal of “equalization of public services” and its statement that “we should accelerate tax reform, in a way to complete a tax system, so that it corresponds to the present allocation of financial and administrative powers between central and local government” in 2012, both of which promoted social fair and stability.Of the 5 chapters in this paper, Chapter I briefly introduces the significance, context, methodologies and content of the research, which is backed up by a literature review. Chapter II is a theoretical basis of the research, including transfer payment and equalized transfer payment. Chapter III analyzes financial positions of all districts in Xinjiang based on current local transfer payment and the transfer payment by the central government. Chapter IV is an empirical analysis of the effects of Xinjiang's equalized transfer payment and problems pertaining to the actual practice. Chapter V provides solutions to and suggestions for the problems in Chapter IV concerning narrowing down the income gap among local government of all levels in Xinjiang.