Finance and tax system reform is key

Updated: 2014-07-03 11:17

By Li Yang (

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Resistance to finance and tax system reform is predictable. However, the central government must overcome such difficulties to modernize its finance and tax system, which will redefine the relations between government and the market, government and citizens, and central and local governments, said an article in 21st Century Business Herald. Excerpts:

China’s central government has vowed to establish a modern, transparent and fair government finance and tax system by 2020, which will be regarded as a breakthrough to deepen reform in some difficult fields.

The finance and tax system is related to many pressing issues that define the boundaries of government power. The National People’s Congress, China’s top authority and lawmaker, and its local branches must watch over the making and execution of government budgets effectively. If the NPC cannot fulfill its responsibilities, local governments will have nothing to fear.

As representatives of the people, NPC members should fulfill their duties as lawmakers and government supervisors to ensure all taxes have a legal basis. Judicial authorities must maintain their independence on government cases.

Today, some taxes are levied overnight at the will of local governments in some places, without the authorization of law.

In the legal framework, the NPC should work together with the central government to adjust tax categories and tax rates according to the needs of the national economy, to serve the macro economy and promote fairness in wealth distribution.

Moreover, taxpayers deserve the right to know how their money is being spent. The tax system is an important aspect of the contract between a government and its people. A modern tax system is the foundation of modern government, society and citizenship.

Redistributing responsibilities and tax revenues among governments at various levels and giving local governments the rights of issuing bonds so they can give up their reliance on revenue from land transfers are also urgent tasks to relieve debt pressure on local governments and reduce government interference in the market.