OECD Economics Department Working Papers

ISSN :
1815-1973 (online)
DOI :
10.1787/18151973
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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

 

The System of Revenue Sharing and Fiscal Transfers in China You or your institution have access to this content

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Author(s):
Xiao Wang1, Richard Herd1
Author Affiliations
  • 1: OECD, France

Publication Date
27 Feb 2013
Bibliographic information
No.:
1030
Pages
37
DOI
10.1787/5k4bwnwtmx0r-en

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The main features of China’s current sub-national finance arrangements date back to the 1994 tax reform. China has a multi-level government structure that shares national tax revenues through a system of tax sharing and transfers, and divides spending assignments and responsibilities. Local governments have hardly any discretionary power to modify taxation, though they have some non-tax revenue from fees, levies and penalties. They can also spend the profit from the sale of land-use rights subject to central government restrictions. As the 1994 tax reform recentralised revenues and decision-making power, vertical gaps between revenue and expenditure at sub-national levels have grown. In order to accommodate this, the central government has raised the scale of transfers. Over the past decade, China’s transfer policy has addressed the horizontal imbalances and become markedly more redistributive. Nevertheless, fiscal disparities within provinces remain high and are much greater than between regions in OECD countries. The extent of fiscal equalisation within provinces varies, thus affecting the delivery of services. The government’s plan to equalise service provision across the country therefore calls for fine-tuning the transfer system and improving local revenue. Some local governments are testing a residential property tax but not in a form that would substantially raise tax revenue. A significant property tax would tend to lower the revenue from the sale of land-use rights and would, in general, improve the fiscal position of those local governments that already have strong budgets. This Working Paper relates to the 2013 OECD Economic Survey of China (www.oecd.org/eco/surveys/china)
Keywords:
property taxation, local government, service equalisation, tax sharing, China, public finances, fiscal disparities, land-use rights, intergovernmental transfers
JEL Classification:
  • D63: Microeconomics / Welfare Economics / Equity, Justice, Inequality, and Other Normative Criteria and Measurement
  • E62: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Fiscal Policy
  • H11: Public Economics / Structure and Scope of Government / Structure, Scope, and Performance of Government
  • H24: Public Economics / Taxation, Subsidies, and Revenue / Personal Income and Other Nonbusiness Taxes and Subsidies
  • H25: Public Economics / Taxation, Subsidies, and Revenue / Business Taxes and Subsidies
  • H27: Public Economics / Taxation, Subsidies, and Revenue / Other Sources of Revenue
  • H51: Public Economics / National Government Expenditures and Related Policies / Government Expenditures and Health
  • H52: Public Economics / National Government Expenditures and Related Policies / Government Expenditures and Education
  • H60: Public Economics / National Budget, Deficit, and Debt / General
  • H61: Public Economics / National Budget, Deficit, and Debt / Budget; Budget Systems
  • H71: Public Economics / State and Local Government; Intergovernmental Relations / State and Local Taxation, Subsidies, and Revenue
  • H72: Public Economics / State and Local Government; Intergovernmental Relations / State and Local Budget and Expenditures
  • H73: Public Economics / State and Local Government; Intergovernmental Relations / Interjurisdictional Differentials and Their Effects
  • H74: Public Economics / State and Local Government; Intergovernmental Relations / State and Local Borrowing
  • H77: Public Economics / State and Local Government; Intergovernmental Relations / Intergovernmental Relations; Federalism; Secession
  • R52: Urban, Rural, Regional, Real Estate, and Transportation Economics / Regional Government Analysis / Land Use and Other Regulations