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Five Questions to Be Solved in Cancellation of the Three Agricultural Taxes and the Policy Proposals (Excerpts)


Ni Hongri

Research Report No 063, 2004

I. Cost of Reform and the Bearing Capacity of the Higher-Level Financial Departments Such as the Central Financial Departments and Financial Departments at the Provincial Level

Fund supply for rural public service seems to come mainly from the new agricultural taxes after the reform of the rural taxation. Cancellation of agricultural taxes without considering exploration of new financial resources just means that this part of fund sources will be undertaken by the central financial departments, provincial financial departments and municipal financial departments. Whether this part of cost of reform can be undertaken and how to afford it are a problem to be dealt with in the first place.

The following proposals are hence put forward: the first is to break the original Base Method as regards the funds needed by rural public service, determine the amount standard through typical investigations, including the delimitation of the organizational personnel structure in government institutions, fund quotas and the reasonable fund quotas for the compulsory education, etc., and then determine the overall scale of transfer payment; the second is to determine the obligations to be undertaken by the central, provincial and municipal governments, as well as the scales of the transfer payment to be undertaken by the governments respectively; the third is to adopt policies towards transferred payment to deal with economically developed regions, moderate developed regions and undeveloped regions in different ways and, after the cancellation of the agricultural taxes in economically developed regions, the provincial financial departments can undertake the major responsibility for transfer payment; the fourth is that the departments and commissions concerned should do an overall good job of the budget for the cost of reform, so that the Ministry of Finance can make a good medium-term and long-term budget rollover to guard against the financial risks of the governments.

II. Stabilization and Restructuring of the Rural Grass-Roots Governments

Cancellation of the three kinds of agricultural taxes and the amount of the cost of reform are closely bound up with the setup of the rural grass-roots government organizations. Over the years, there have been different arguments about the setup at the government level and the setup of the rural government organizations. The main viewpoints and practices include: 1. Abolishing or dissolving governments at the prefectural or municipal level and at the village or township level and changing them into agencies of the governments of higher level and, in particular, the appeal for cancellation or dissolving of the village or township governments runs higher. 2. Removing or merging village and township governments to reduce the number of village and township governments. 3. At the level of local government, both the provincial government and the grass-roots government should be strengthened. Restructuring of the grass-roots governments can be done through the merger of county and village governments into one, that is, to enlarge the number of the county governments and to reduce the spheres of jurisdiction under county governments and, meanwhile, to dismiss governments at the village and township level.

The author tends to be in favor of the third viewpoint. The main reason is that China has its specific national conditions. Including: the first is the public land ownership, namely, the rural land system is dominated by collective ownership. Under such system, it is the grass-roots governments and the village organizations in nature, as representatives of the rural residents, who realize the collective ownership of the rural land. The second is the numerous rural population. The population density of the Chinese rural areas is much higher than that of the economically developed countries. The intensity of the service and management by rural communities decides that there should be a large number of grass-roots governments and that such governments cannot cover excessively numerous spheres of jurisdiction. The third is that China stands now right in the transitional period of the economic system and, in the course of eliminating urban-rural dual structure, industrialization and urbanization, there will be a prodigious amount of issues to be dealt with by the government, and the gradually-advancing way of reform led by the Chinese government will still play a positive role. As a result, after the cancellation of the three agricultural taxes, it is of vital importance to satisfy the need for funds of rural grass-roots governments and rural public service, stabilize services and management provided by grass-roots governments and continually make reforms of such services and management by means of transfer payment by the financial departments of the governments at various levels.

III. Management and Supervision of the Rural Public

Financial Funds After cancellation of the three agricultural taxes and various charges and apportionments, within a certain period of time, a handsome part of the financial funds for the supply of rural public products will come from the transferred payments by central financial departments and financial departments of the local governments at various levels. According to Chinese domestic and international experiences, the following rules and mechanism should be established and perfected:

1. A definite and rigorous standard on personnel delimitation, delimitation of organizational structure and the fund quota should be carried out for the government institutions and this standard should by no means be allowed to break through.

2. The Performance and Achievement Examination System and the Government Responsibility Inquiry System should be established and the conscientious performance examination should be conducted of the use of financial funds; for those who fail to meet the performance examination standard, or who make mistakes in their work, or who neglect their duties, their responsibilities must be looked into and they must be given proper punishment by means of the establishment of the Government Responsibility Inquiry System.

3. A mechanism of citizens imposing effective supervision upon government functionaries should be established. The above-mentioned two points can be regarded as the management and supervision system imposed by the higher governments on the lower governments. But it is not enough to only have the higher authorities supervising the lower authorities. A set of effective mechanism of the public supervising the governments should be established. Such supervision mechanism still needs systematic innovation and popularization.


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