Author ORCID Identifier

https://orcid.org/0000-0002-7956-5076

Document Type

Report

Publication Date

1990

Abstract

The tax structure and the system of intergovernmental fiscal relations are inextricably linked in the Chinese fiscal system. The laws of taxation and the powers and responsibilities of the various levels of government are laid down by the central government, and subnational governments are responsible for tax administration, share in revenue collections, and have a substantial amount of latitude in awarding tax preferences to enterprises. The development of the system--perhaps better characterized as a series of arrangements--of tax administration and central/local relations has given provincial and local governments increasing freedom to alter the fiscal system to meet their own objectives. Among the more important implications of this arrangement is that the "tax levers" the central government designs may be different from the fiscal measures actually implemented at the local level. Yet the success of any central government tax reform will depend on the implementation by subnational governments. A successful tax reform program in China will almost certainly have to be accompanied by changes in the system of intergovernmental relations. Section A below reviews the experience, principles and criteria for decentralized and centralized fiscal systems. In Section B, China's system of intergovernmental relations is described. An initial assessment is outlined in Section C, while Section D develops options for reform. One option is in keeping with the present centralized model, but strengthens it in numerous ways; another is a decentralized model. The choice between these two depends on the Chinese authorities' desire for macro-control and equalization capability, compared with the benefits of decentralization.

Comments

Chapter III in China: Revenue Mobilization and Tax Policy World Bank Country Study, The World Bank, 1990.

Creative Commons License

Creative Commons Attribution 3.0 License
This work is licensed under a Creative Commons Attribution 3.0 License.

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