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The Course of Fiscal and Taxation System Reform: Problems and Countermeasures (No.63, 2019)


By Chen Changsheng, Li Chengjian & Jiang Yu, Research Team on “Modernization-Oriented Fiscal and Taxation Reform”, Research Department of Macro Economy, DRC

Research Report, No.63, 2019 (Total 5563) 2019-4-30

Abstract: Fiscal and taxation system reform is one of the key tasks of China’s reform and opening up. Since reform and opening up, the reform of fiscal and taxation system has strongly promoted, coordinated and led the transformation of China’s economic system from a planned economy to a socialist market economy. At the same time, the fiscal and taxation system also realized continuous transformation to public finance, making important contributions to social and economic development. Currently, China’s fiscal and taxation system has some prominent problems to be addressed, such as the improper tax structure, inefficient fiscal expenditure, unbalanced relationship between the central and local governments, unsound budget management and high pressure in debt management. According to the overall requirement and framework of the modern financial system construction, this paper puts forward the following policy options to address the major issues and key points in the reform. The relevant government departments need to simplify the tax system and reduce tax rates, take consumption tax and real estate tax as the main local taxes, implement the national basic social security package system, reduce spending on economic affairs, introduce a mechanism for evaluating competition policies, improve the government procurement system, speed up the reform of the division of administrative authority and spending responsibilities between the central and local governments, enhance the budget disclosure and oversight system, and improve the governments’ capacity in terms of debt and budget management.

Key words: fiscal and taxation system, reform process, prominent problems, key issues to be addressed