Intergovernmental Fiscal Relation in China
Keywords:Fiscal Contracting System (FCS), Western Market-Economy, Intergovernmental Fiscal Relations, Public Policy & Governance, China
Conventionally, the Chinese fiscal and revenue collection system has been highly centralized with almost no-taxation power for local governments as well as control over their budget. Local governments have been bound to remit most of the taxes to central government who in turn transferred it back to them in accordance with their needs and requirements. In the year 1980, Fiscal Contracting System (FCS) was introduced to decentralize the fiscal scheme by adopting some features of Western Market-Economy. It proved economical because by administering the local affairs at local level weigh down the fiscal burden at part of the central government. The evaluation of the inter-regional fiscal system reflects that the FCS has brought substantial fiscal autonomy for sub-national governments which enabled them to expand their contribution towards national economic growth through remitting fix share to national exchequer. The whole tax system was categorized into three levels: central, regional, and joint central/regional level taxes while the inheriting principle of dual supervision has made local governments accountable to the higher levels. But contradiction between theory and practice of Chinese governance pertaining to intergovernmental fiscal relations is particularly posturing immense challenges for establishment of a transparent and equitable fiscal system.
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