Postscript: Establish and improve a fiscal and taxation system conducive to scientific development
- Deepen reforms and build a fiscal and taxation system that matches financial power with executive power
- Gradually form a reasonable division of executive powers, rationalize the allocation of central and local financial powers and income, and promote the transformation of economic development mode and the formation of a unified market
- Grasping the opportunity to promote the reform of resource tax and property tax, enrich the local tax system, increase local revenues, and improve the security capacity of local public services
- Accelerate the development of a sound and standardized top-down transfer payment system at central and provincial levels, as well as the necessary “counterpart support" and other horizontal transfer payment systems, to play the role of fiscal equilibrium system
- Improve the total score system of enterprise income tax sources and optimize relevant mechanisms to balance interests
The Seventeenth National Congress of the Communist Party of China proposed implementing a Scientific Outlook on Development, that is, “to adhere to the people-oriented development, establish a comprehensive, balanced and sustainable development concept, and promote the comprehensive development of the economy, society and people”. It also proposed to promote various undertakings and work, in accordance with the requirements of “five overall considerations”. The five overall considerations are: balance urban-rural development, interregional development, economic and social development, relations between people and nature, and domestic development while being open to the outside world. Not long ago, the Recommendations of the Central Committee of Communist Party of China on the Formulation of the Eleventh Five-Year Plan for National Economic and Social Development clearly emphasized the theme of accelerating the transformation of the mode of economic development. At present, China’s economy is stabilizing after resisting the impact of the 2008 global financial crisis. The main contradiction in macroeconomic regulation and control has shifted from “insufficient domestic demand” to “structural constraints”. The Party’s Central Committee has called for an accelerated transformation of the development mode and the implementation of the Scientific Outlook on Development, aiming at extensive development in real life and the low-level redundant construction. The negative effects of these problems have become increasingly prominent with the progression of the economy and society, which has aggravated the constraints of resources and the environment. It is a deep drag on China’s medium- and long-term construction of a comprehensive well-off society and the promotion of sustainable modernization. In order to achieve scientific development while continuing to expand domestic demand, it is necessary to closely combine short-term regulation with medium- and long-term institutional design and construction, mechanism transformation, and improvement, including actively establishing and bettering financial and taxation systems that are conducive to scientific development.
Deepen reforms and build a fiscal and taxation system that matches financial power with executive power
The hierarchical fiscal system based on the tax-sharing mechanism formed by the fiscal and taxation reform in 1994 needs to be further improved to strengthen the endogenous scientific development motivation of governments at all levels.
Gradually form a reasonable division of executive powers, rationalize the allocation of central and local financial powers and income, and promote the transformation of economic development mode and the formation of a unified market
Generally speaking, the hierarchy of government and finance should be appropriately reduced under the direction of “flattening” reform. The functions and powers of governments at the central, provincial, city, and county levels should be rationalized and clarified according to the objective requirements of a market economy. We should form a detailed list of the rights (including the specific sharing plan of shared powers), strive to rationalize the tax base, and reduce the sharing tax appropriately, in accordance with the principle that financial rights and powers are in line. Taxes that are likely to cause tax source transfer and unfair distribution among regions—as well as those that are conducive to the implementation of income distribution adjustment at the central level, the transformation of economic development mode, the promotion of sustainable use of resources, and the formation and improvement of unified markets—should be determined as central fixed income. Specifically, in order to perform macro-control functions, the national government should grasp the types of taxes that are conducive to maintaining a unified market with strong liquidity, unsuitable separation, and functions of income redistribution and macroeconomic “stabilizers”, such as personal income tax; taxes that are beneficial to implementing industrial policies, such as consumption taxes; and those associated with national sovereignty, such as tariffs. In order to fulfill the functions of providing regional public goods and optimizing the investment environment of the jurisdiction, local governments should understand the types of taxes that have weak liquidity, information superiority, and management advantages, and that can form a positive interaction with the performance of functions, such as real estate taxes and resource taxes.
Grasping the opportunity to promote the reform of resource tax and property tax, enrich the local tax system, increase local revenues, and improve the security capacity of local public services
The base of the main types of local taxes should be broader, more stable, illiquid, and with burdens that are not easy to pass on, so that the local tax burden falls on residents and the cost and effectiveness of local public goods are better linked. China’s main types of local tax mainly consist of business, property (namely, real estate), urban maintenance and construction, and resource taxes. In addition, research should be conducted on the rights of the local government to choose certain taxes or adjust the rates of local taxes, as well as on the future taxation of certain regional sources.
Accelerate the development of a sound and standardized top-down transfer payment system at central and provincial levels, as well as the necessary “counterpart support" and other horizontal transfer payment systems, to play the role of fiscal equilibrium system
We should continue to expand the scale of general transfer payment funds, clean up and integrate special transfer payment projects, and improve the transfer of the factor method. In view of the different functional positioning of each region, transfer payment support for agriculture, forestry, animal husbandry, and ecological regions should be further institutionalized and standardized. It is also conceivable to establish a horizontal transfer payment system based on ecological compensation in combination with the construction of the main functional area. The system refers to establishing an inter-regional ecological transfer payment fund between governments at the same level with close economic and ecological relations, through collaboration between the upper and lower areas and the entire basin to achieve an effective sharing of ecological costs and “win-win” development. Therefore, in the next stage, between the specific water system, the upper and lower areas of the watershed, and between the water source and the utilization areas, it is necessary to actively try to establish “one to one” horizontal ecological compensation through forms of coordination by superiors, the participation of experts in negotiations, and so on.
Improve the total score system of enterprise income tax sources and optimize relevant mechanisms to balance interests
The taxation method of uniform calculation, hierarchical management, local prepayment, summary liquidation, and fiscal adjustment was implemented in the total score branches of provincial and municipal enterprises, which has promoted tax fairness between regions to a certain extent. But it has also caused inconsistency in competent tax authorities between the head office and branches of enterprises, which still leads to disputes over vesting, collection, and management rights of enterprise income taxes between the two entities. In the future, we should further reform the tax source total score system from the perspective of balancing the two sets of collection and management systems and the interests of the regions, rationally allocate relevant responsibility and rights of income tasks and management matters, mobilize the management enthusiasm of tax authorities of the branches, and pursue a more reasonable balance of interests.