Dissertation > Economic > Fiscal, monetary > Finance, the state's financial > China's financial > Rural finance

"Finance Building of Town Government": On Fiscal Legitimacy of Rural Grass-roots Government

Author RenBaoYu
Tutor XuYong
School Central China Normal University
Course Political Theory
Keywords rural grass-roots government finance fiscal legitimacy fiscal governance system
CLC F812.8
Type PhD thesis
Year 2007
Downloads 876
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Instructed by the economic analysis method of Marxism politics and utilizing the Western public fiscal theory for reference, this paper is proposes the analytical concept of fiscal legitimacy. Applying this concept, the paper conducts an extensive case study on the development of the fiscal conditions in Liu Town, which is an agricultural district in central China.The paper takes rural grass-roots government’s finance as the breakthrough point of research on rural politics, and the fiscal legitimacy concept as the basic narrative logic. Closely centering on the relations between finance and politics, finance and economy, it describes the Liu Town’s fiscal historyover the past 20 years since the establishment of its fiscal system, discusses the Iiu Town’s fiscal characteristic and legitimacy condition in different development phases, analyzes primary factors affecting the rural grass-roots government’s fiscal legitimacy, and points out the intrinsic connections between fiscal legitimacy and fiscal governance system, social economy system and economical relations. Finally, linking to the rural taxes and fees reform, the paper discusses how to establish fundamentally fiscal legitimacy of rural grass-roots government.The paper is divided into three parts, namely introduction, main text, conclusion and discussion. The main text is divided into six chapters.The introduction part mainly introduces the specific questions in this research, the reason for choosing the topic as well as the topical significance of the research, combs the related research achievements, introduces the tools and approaches for analyzing and the traits and innovation of this study. Among them, the fiscal legitimacy is an analytical concept which is the characteristic of this research.Chapter 1 mainly introduces the basic situation and typical trait of Liu Town to enable readers to correctly understand the value of this research. This case chooses a typical agricultural town in central China as an example. Before the taxes and fees reform, agriculture is the fiscal foundation and backbone of Liu Town.From chapter 2 to chapter 6, a diachronic narrative method is mainly adopted. According to the Liu Town’s fiscal characteristics in different period, this part is divided into five stages, each stage is one chapter. Chapter 2 makes a simple review to the evolution of our country’s centralized fiscal system as well as the establishment of town’s fiscal syetem. More emphasis is given to the study of the fiscal situation in an earlier time (1984-1988) in Liu Town. During the initial period, the finance in Liu Town displayed the characteristic of revenue and expenditure as a whole as a result of the influence from the traditional centralized fiscal system . But soon the old system was displaced by the system of independent finance system at different levels. The finance of the town began to reveal it independence.Chapter 3 mainly inspects the fiscal system, fiscal conditions and characteristics of Liu Town from 1989 to 1994. In 1989, the establishment of Liu Town’s treasury symbolized the establishment of the system of independent finance system at different levels. The independence and freedom of Liu Town’s finance were greatly enhanced. On the other hand, due to the pressurized governmental system, the county finance bureau pressed the town finance through the formulation and adjustment of fiscal management system to villages and towns. In addition, it also extracted directly the towns’ fiscal resource, which burdened towns’ finance. Due to continual fiscal extrusion of county fiscal bureau as well as the towns’ impulse to increase their own controllable fiscal resource, the town government enhanced unceasingly their capacity to derive the fiscal resource. As a result, the collective withdrawn funds and the income outside budget grew fast. In the traditional way of fiscal governmence, the fast growth of driving the fiscal resource by the town’s fiscal syetem caused some social conflictions inevitably. But until this time fiscal legitimacy crisis had not yet been conspicuous due to the achievement legitimacy produced by the rural reform.Chapter 4 mainly inspects the fiscal system, the fiscal government condition and the characteristics of Liu Town from 1995 to 1998. During this time, Liu Town’s capacity of deriving fiscal resources continued to increase at a high speed and achieved the peak around 1998. The main reasons for the fiscal inflation during this period include the severe severe lack of fiscal supervision as well as the villages and towns’ intrinsic impulse to expand. The lack of fiscal supervision also affected the fiscal utilization efficiency, even induced the finance corrupt. Because the towns’ fiscal governance system had not yet been transformed, the town government had to strengthen unceasingly the traditional way to derive fiscal resources in order to increase the financial revenue, even not hesitate to depart from nation’s related policy. During this time, the social confections initiated by the fiscal problem increased obviously, and the towns’ fiscal legality faced unprecedented challenges.Chapter 5 mainly inspects Liu Town’s fiscal governing condition and characteristic from 1999 to 2001. During this time, because the excessively quick growth of rural finance was restricted by farmers economic bearing capacity as well as the local government’s bearing capacity, the central government had taken the severer control means to the rural grass-roots government’s finance. Therefore, the fiscal amount derived by Liu Town slightly decreased and tended to be stable. But due to the impulse of strengthening unceasingly the traditional fiscal collecting measure and expanding income outside budget, the relation between the government and peasants was not improved at all. Meanwhile, because of the serious flaw existed in the management of fiscal expenditure as well as the difficult to increasing revenue, and also the expenditure factors increased unceasingly, Liu Town’s fiscal contradictory was aggravated, and the fiscal legality crisis also proliferated.Chapter 6 mainly inspects Liu Town’s taxes and fees reform from 2002 to 2005. During the short 3 years, this reform began with transforming fees into taxes, then reduced the agricultural tax rate, finally cancelled the agricultural taxes completely and gave direct subsidy to farmers planting crops. As a result, farmers’ burden was reduced greatly, the legitimacy of towns’ finance as well as rural local government was improved. But this reform also reduced towns’ incomes, and effected towns’ fiscal functions negatively. The reform also causes the radical change of the fiscal revenue structure. The rural finance made an important step from traditional finance to modern finance. However, it called for further reform in that up to now, the reform was far from finished, not only because the reform in the revenue area was inadequate, but also the reform in the expenditure area remained untouched. In addition, a healthy fiscal relationship between the town and county still remained to be built. Therefore, there was a long way to go to achieve the goal of the reform.The conclusion summarizes the main understanding achievements of this research. Based on the inspection and analysis for Liu Town, the paper believes that once the town’s finance was set up, it will obtain the corresponding independence, and reveal its natural disposition of expansion. In our traditional fiscal governance system, the rural local government’s fiscal expansion also means the growth of peasants’ burden. This process usually followed by the drop of fiscal legitimacy. In the towns’ fiscal history, the fiscal relation between county and town creates the important attribution to the town’s fiscal expansion. But compared with the peasants’ burden and the fiscal relation between county and town, the fiscal governance of the towns are the more basic factors affecting the fiscal legitimacy of towns; the rural taxes and fees reform starting from the beginning of 21 century plays a vital role in improving the fiscal and political legality of rural grass-roots governments, but the reform had not yet completely jumped out of the traditional way of thinking for alleviating burden, and did not transform systematically the fiscal governance system, therefore it did not settle thoroughly the fiscal legitimacy crisis of rural grass-roots governments.Finally, the paper discusses how to establish radically the fiscal legality of rural grass-roots governments. It believes that the establishment of rural public fiscal system adaptable to our socialist market economic system and socialist democracy politics is the most effective solution to the fiscal legitimacy of rural grass-roots governments. Therefore, we must take measures as follows. Firstly, we should rationalize the fiscal relations between town and central or other superior government and establish the scientific and standard fiscal transferring system. Second, we should make sure the publicity of the finance of local governments by bringing into some systems, so that the finance can be truly the finance of the people, by the people and for the people. In addition, the specific way to establish the rural public fiscal system is to set up and improve the fiscal budget system of rural grass-roots governments.

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