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The System of Revenue Sharing and Fiscal Transfers in China

Listed author(s):
  • Xiao Wang


  • Richard Herd


Registered author(s):

    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 ( Le système de partage des recettes et des transferts budgétaires en Chine Les principales caractéristiques des accords de financement infranationaux actuels en Chine remontent à la réforme fiscale de 1994. La Chine possède une structure administrative à plusieurs niveaux qui partage les recettes fiscales nationales par le biais d'un système de répartition des recettes fiscales et de transferts, et qui attribue les missions et responsabilités en matière de dépense. Les collectivités locales n'ont guère de pouvoir discrétionnaire afin de modifier la fiscalité, même si elles collectent des recettes non fiscales provenant de divers droits, prélèvements et amendes. Elles peuvent aussi dépenser les recettes provenant de la vente de droits d'usage des terrains sous réserve de restrictions imposées par le gouvernement central. Comme la réforme fiscale de 1994 a centralisé de nouveau les recettes et le pouvoir de décision, les déséquilibres verticaux entre recettes et dépenses au niveau infranational se sont accentués. Afin d'en tenir compte, le gouvernement central a augmenté le volume des transferts. Au cours de la décennie passée, la politique des transferts en Chine a répondu aux déséquilibres horizontaux et est devenue nettement plus redistributive. Néanmoins, les disparités fiscales au sein des provinces demeurent élevées et sont beaucoup plus grandes qu'entre régions des pays de l'OCDE. Le degré de péréquation au sein des provinces varie, ce qui affecte la prestation de services. Afin d’égaliser cette dernière dans tout le pays, le plan du gouvernement appelle donc à peaufiner le système de transferts et à améliorer les recettes locales. Certaines autorités locales sont en train de tester un impôt foncier résidentiel, mais pas sous une forme qui permettrait d'augmenter considérablement les recettes fiscales. Un impôt foncier important aurait tendance à réduire les recettes provenant de la vente de droits d'usage des terrains et, plus généralement, améliorerait la situation financière des administrations locales déjà dotées de solides budgets. Ce Document de travail a trait à l’Étude économique de l’OCDE de la Chine, 2013 (

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    Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 1030.

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    Date of creation: 27 Feb 2013
    Handle: RePEc:oec:ecoaaa:1030-en
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