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China to Set Up New fiscal system
China will establish a new nationwide fiscal system within three to five years, according to Finance Minister Xiang Huaicheng, as is reported by Chinadaily.
"Governments at all levels will be required to bring their fiscal operations and budgets into line with the requirements of the new fiscal system," Xiang told a national financial working conference last week.
The central government will stop allocating funds from its budget to commercial activities at lower levels that the government says should be operated under the regulation of the market-oriented economy.
It will also gradually reduce subsidies to loss-making State-owned enterprises, reimbursements of taxes paid by enterprises, funds allocated directly to State-owned enterprises and tax incentives for enterprises in trouble.
The government will deposit all fiscal revenues into national treasury accounts and will allocate funds for fiscal expenditures directly from these accounts.
It will prohibit other governmental departments and local authorities from holding fiscal revenue accounts, he said.
"The central government will require various governmental departments to draft their own separate budgets," he said, adding it will allow more government departments to do this on an experimental basis during the second half of this year.
"The government will strive to make breakthroughs in fiscal expenditure reform across China in the next three years."
The country will also actively engage in reform of its tax system in the coming years, he said.
China will gradually shift its value-added tax levy. Instead of taxing production, it will target consumption.
It will also expand the scope of consumption taxes to cover more goods and services.
"The country will adopt a unified income tax system for Chinese and foreign-funded enterprises," he said.
China will also gradually set up a revenue co-share system between central and local governments and phase out preferential tax rates adopted in some regions to encourage the growth of some professions and to subsidize some sectors, Xiang said.
The country will improve the personal income tax system and adopt an inheritance tax to narrow the gap between the rich and the poor, he said.
According to Xiang, the Chinese Government has already formulated a tax plan to replace arbitrary charges on motor vehicles and road transportation fees, which will be put into effect some time later.
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