Opinion / Op-Ed Contributors

Money and tax system reforms

By Liu Shangxi (China Daily) Updated: 2013-11-30 08:14

The NPC too holds a budget debate. But the debate is restricted mainly to discussions among various government departments and agencies on how to divide and spend fiscal funds, instead of representatives discussing how much money should be given to the government. Therefore, it's more like a competition among different departments to get funds than supervision of the departments.

Since budget will now be gradually regulated by law, government agencies in China will have to learn to earn and spend money according to law, which is a more convenient way for the people to supervise them.

The reform will not only redefine the relationship between the legislative and administrative branches of the government, but also influence the relationship between the central government and local governments. The plenum document says there is need to "motivate both the central and local levels of governments".

According to that principle, China's financial system will be gradually divided into two levels: central and local. While the central government will keep the same tax mechanism nationwide, local governments will have to implement financial reforms according to their size of population, land area, level of economic development and other factors, thus enjoying greater freedom in finance.

But greater freedom will come with greater responsibilities like environmental protection and social security. In this way, the central and local governments will be more motivated to serve the common goal of development.

In other words, financial reform is more than "reform of money" - it means the reform of several important relationships to better propel the country's economic development.

The author is deputy director of the Institute of Finance Science, affiliated to the Ministry of Finance. The article is an excerpt from his speech at a recent conference held by the China Institute for Reform and Development.

(China Daily 11/30/2013 page5)

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