Rural Taxation and Local Governance Reform in China’s Economic Transition:Origins,Policy Responses a

  This paper examines the historical evolution of China ‘s rural taxationsystem and provides an initial assessment of the ongoing rural tax reform.It is argued that the issue of rural taxation and local governance inChina is one typical challenge arising from the inherent tension betweenan increasingly liberalized economic system and a still centralized politicalsystem.Though the rural tax reform has helped to reduce farmers’taxburden in the short term,the establishment of an effective local governanceregime requires coordinated reforms to downsize local bureaucracy by providingsocial security for laid-off cadres ,to strengthen local accountabilityby granting higher local formal tax autonomy,and to promote meaningfulparticipation by expanding local democracy.

  1 Introduction

  The market-oriented reforms launched in 1978have changed the economiclandscape of China and have improved the dynamism of both the rural andurban sectors.In the past 27years ,China has transformed itself froma centrally planned economy to an emerging market economy whilst achievingan average GDP growth rate of more than 9percent (Lin et al.2003)。Market-oriented reform also dramatically reshaped China ‘s countryside.During the early 1980s,agricultural productivity rose steadily withthe introduction of the Household Responsibility System (HRS )。Ruralindustrialization also took off rapidly in the second half of the1980sand continued to grow fast in the early half of the 1990s as town andvillage enterprises (TVEs)evolved quickly to meet a pent-up demandfor consumer goods and take advantage of a pool of cheap rural labor.

  However ,the transitional path China has been taking so far is notwithout problems.One of the most serious challenges is the ever-growingspatial inequality that disadvantages the nation‘s vast countryside.Though agricultural growth and rural industries expansion in the 1980ssignificantly raised farmers’income,urban-rural income disparity ,having dropped from a ratio of 2.6in 1978to 1.8in 1984,bounced backto a historical high of 3.2by 2005(see Figure 1)。


  Within rural areas,spatial disparity is also rising steadily.Economicgrowth has been much greater in coastal regions that are able to industrializefaster.However ,the more agriculture-dependent inland areas witnessedsomething close to stagnation in the second half of the 1990s.Accompanyingthe growth slowdown in these regions was a flood of angry public protestspowered by farmers‘frustrations arising partly from excessive tax burdens.In China’s major grain-producing provinces such as Anhui ,Hubei,Hunanand Sichuan ,the tax rates on the poorest farmers sometimes surpassed30percent of their incomes (Chen,2003)。Under some extreme circumstances,farmers opted to move to cities on a large scale leaving their land fallow,because they could not afford the heavy taxes (Berstein and Lu ,2000)。

  To address the bitter complaints from farmers about excessive taxburdens ,the central government initiated a series of governance reformsin recent years.The government under the leadership of President Hu Jingtaoand Premier Wen Jiabao started removing all local informal fee chargesand formal agricultural taxes on farmers when they took office in 2003.The fee and tax have been completely abolished at the beginning of 2006.Local bureaucracy streamlining was also initiated in the same period todownsize local government and reduce expenditure on personnel.Under themost recent move to construct a “New Socialist Countryside ,”the centralgovernment is planning to channel more transfers to the countryside toimprove the development of rural infrastructure and the provision of publicservices.

  This paper examines the evolution of China‘s rural tax regime andprovides an early assessment of the government’s rural policy initiativesthrough the first half of 2006.The objective is to provide an analyticalframework for investigating local governance issues during economic transitionand gain a better understanding of China‘s overall transition process.Compared with most other transition economies ,many economists considerChina to have adopted an unconventional reform approach in embracing“gradualism.”The experimental approach of“Crossing the River by Gropingfor Stones”has led to rapid economic growth,but it also complicateseconomic transition.Incomplete institutional changes frequently failedto resolve problems inherited from the plan period,even as they frequentlygenerated new challenges.In this paper ,we argue that the issues ofrural taxation and local governance in China are typical of the challengesthat arise from the inherent tension between an increasingly decentralizedand liberalized economic system and a still centralized political system.Therefore ,a full and smooth transition warrants more thorough,bettercoordinated governance reforms.

  The rest of the paper is structured as follows.Part 2describes theevolution of China‘s rural tax system since the plan period.Based ona newly available data set that covers periods both before and after therural tax reform,Part 3evaluates the impacts of the reform on farmers’tax burdens.Relating the ongoing rural tax and local governance reformsto China‘s overall transition process,Part 4provides an analyticalframework for China ’s local governance regime and pinpoints the remainingchallenges.Part 5concludes.

  2.The evolution of China ‘s rural tax system

  2.1 Plan Period :agricultural taxation through price scissors

  A formal state agricultural tax was present in the People ‘s Republicof China as early as the 1950s.The national average rate of this taxwas set then at 15.5percent of a state-defined tax base that was fixedfor several decades.In the 1950s and 1960s the tax base was on averagea third lower than the national grain output.Therefore ,the actualagricultural tax rate was around 10percent of grain output in China’s first and second“Five-year Plan”periods (1953-57and 1958-62)。As grain output grew in the 1960s and the 1970s ,the effective ratedeclined to 6and 5percent respectively in the third and fourth“Five-yearPlan periods”(1966-1970and 1970-1974)。Judged by these numbers,the formal agricultural tax was not very high during the command periodand even declined from the 1950s to the 1970s.

  However ,farmers were taxed much more heavily than the state agriculturaltax statistics suggest.By controlling the distribution of food and beingthe main or only supplier of such vital agricultural inputs as fertilizer,pesticides,water and electricity,during the plan period the Chinesestate was able to tax agriculture implicitly through the price scissors,increasing the prices of agricultural inputs and depressing the pricesof agricultural outputs [1]As Lin et al(2003)have argued,the choiceof a heavy-industry-oriented development strategy in China‘s plan periodcompelled the state to extract resources from agriculture through pricedistortions in order to subsidize the priority sectors.To facilitatesuch taxation ,production brigades and people ’s communes were setup in rural areas and a highly controlled allocation system of major agriculturalinputs and outputs was established.Compulsory procurement quotas wereimposed on farmers and farmers were entitled only to residual grain afterstate procurement.As a tax in kind ,the state agricultural tax wasalso collected via the mandatory procurement system.Between 1953and1978,the implicit taxation through price distortions was as high asCNY 280billion ,17percent of total agricultural output in the sameperiod.This greatly exceeds the formal state agricultural tax(CNY 89.8billion )in the period(Cui ,1988,Yan,1988)。

  Besides the formal agricultural tax and the implicit tax collectedvia the price scissors,farmers faced further levies imposed by localcommunes and production brigades.Before farmers received their incomesfrom rural collectives,the brigades and communes deducted their collectiveaccumulation fund ,welfare fund and cadre compensation.Only thereafterdid team members receive part of their work-points part in grain and partin cash (Lin ,1992)。Therefore,in the plan period the formal agriculturaltax was automatically collected through a mandatory procurement systemin which farmers were required to sell most of their agricultural outputto the state.Because rural collectives were able to control income distributionamong farmers through the work-point system ,local levies by communesand production brigades were also collected before farmers were paid forstate-procured grain(Lardy ,1983,Rozelle,1996)。

  2.2 The 1980s and early 1990s :gradual changes in agricultural taxinstruments

  The agricultural reforms since the late 1970s not only raised agriculturalproductivity dramatically ,but also gradually reshaped the way agriculturewas taxed.In the late 1970s,reform in the agricultural sector was mainlycharacterized by de-collectivization.The Household Responsibility System(HRS )adopted since then furnished individual rural households withincentives by making them the residual claimants to farming returns oncethey fulfill the state grain quota and agricultural taxes and fees(Lin,1992,Debraw e t al,2004)。In the early 1980s ,the mandatory grainquota system was abolished and replaced by grain procurement contractsin which every rural household was required to sell a certain amount ofits grain output at state-set procurement prices.With rare exceptions,the market prices exceed the state procurement prices and farmers thereaftercould market their surplus produce(Lin 1992)。This price margin enabledthe state grain sector,as the agent of the state,to continue tax agricultureimplicitly.

  However ,the introduction of the HRS deprived local governmentsand village community organizations of their power to distribute incomewithin villages.To collect revenue for townships and village collectives,the government introduced two major categories of fees,i.e.,the so-called“five township-pooling funds ”to township governments to provide basicpublic goods such as education,public security,law and order,andcivil service ,and carry out the state mandates of family planning andgrain procurement ,and the“three village levies”to village communityorganizations to provide for collective capital accumulation,collectivewelfare funds and cadres‘salaries.

  Beside the two major fee categories permitted by the state,townshipsand villages also collected revenue implicitly by adding a margin forhousehold grain procurement above the state quota.[2]Adding a marginover the state procurement quota would contribute to local revenue aslocal officials could exploit the price margin between the market pricefor grain and the state procurement price.[3]In practice ,farmers usuallyhad no way to know if there was such a margin and/or how large it was.In many places,implicit taxes on such economic crops as cotton,rapeseed,jute,hemp ,and tobacco;sideline products such as cocoons and pigs;and agricultural inputs such as fertilizers and pesticides were alsocollected by local governments through their control of the transactionchannels and prices.Under the state grain procurement system ,localgovernments had every reason to assert the necessity of regulating thewhole agricultural production structure in order to fulfill their stategrain quotas.In practice ,many local officials dictated farmers‘specificfarming operations.They not only required a specified share of the totalarable land be allocated to grain production,but also frequently mandatedthat farmers plant certain cash crops and sell to them at depressed prices.

  Therefore ,as in the plan period,the continued(though declining)existence of state grain procurement greatly facilitated the impositionof the agricultural tax and various local informal fees.Before farmersobtained the state payment for procured grain sold to the state grainsector,township governments and village community organizations ,withcooperation from the state grain sector ,deducted all the taxes andfees.Farmers were then paid the residual.Because state grain quotaswere still relatively large ,only in rare case was there nothing leftwhen farmers were required to pay more,either in cash or in kind(Bernsteinand Lu,2003)。Given that every rural household was allocated someland under the HRS,in practice both the agricultural tax and most localfees were mainly levied on land allocation,while some other fees werelevied on household members or laborers.Since the land is allocated largelyaccording to family size and labor force,agricultural taxes and feesin rural China can be largely viewed as land-based tax burdens.[4]Withthe introduction of HRS ,China‘s countryside witnessed a gradual transitionin which rural taxation began to change from the dominant tax instrumentof the price scissors to a combination of the pricing instrument and land-basedagricultural taxation with the latter becoming increasingly important.

  However ,rural taxation was still not a prominent issue in the 1980sand the early 1990s as some share of agricultural taxes and fees was collectedthrough the implicit instrument of the price scissors ,and almost allagricultural taxes and local levies could be deducted beforehand underthe remaining grain procurement arrangements.Neither was the issue oflocal illegal levies a very serious one in this period.Even when suchlevies existed,they were at least not very explicit since they wereeither deducted prior to the payment for grain procurement deliveries ,or through the over-procurement from farmers and the control of majoragricultural input distribution by local governments.

  2.3 The 1990s :the emergence of excessive informal taxation in agriculturalregions

  After the introduction of the HRS in the early 1980s,China‘s agriculturalsector in the witnessed a faster market liberalization that began in thelate 1980s continued through the 1990s(Weersink and Rozelle,1997)。The issue of excessive rural taxation emerged in the 1990s when many ruralareas (especially those in agriculture-based regions )experienced asurge of diverse,local illegal fundraising.These fees were imposedon farmers,without explicit government regulations or legislation ,for anywhere between a few dozen and more than one hundred items,rangingfrom charges for road and school construction and other local improvementprojects,to purchase of insurance ,to charges for marriage certificatesor housing construction ,to prohibitive prices for electricity and tapwater ,and so on.For example ,in some regions marriage certificatescost CNY 600,a quarter of the farmers ’average annual net income.Inmany localities ,villages were forced to purchase various newspapersor periodicals(State Planning Commission ,2000)。In the 1990s inrural China ,a large share of the village and township government expenditurecame from such informal charges.These fees did not enter into formalbudgets but constituted an important share of local extra-budgetary revenuefor township governments and village collectives.

  The emergence of excessive rural taxation and the surge of informalfee charges did not occur uniformly throughout China.It is a regional,though still relatively broad-based ,phenomenon that mainly involvedinland agriculture-based areas in the second half of the 1990s.Usinga 6000household panel data set from 1986to 1999collected by the Ministryof Agriculture,we calculate rural tax burdens as a share of farmers‘income for 10provinces (both developed and under-developed)acrossChina in 1986,1993and 1999.As shown in Table 1,on average ,therewas no significant increase in rural direct taxes as a share of ruralnet income in the period covered.In most provinces ,total tax burdenson rural households (both formal taxes and informal fee charges)grewonly by 1-4percentage points as a share of rural net incomes from 1986to 1999.In some more developed coastal provinces such as Guangdong andZhejiang,there was even some decline of tax rates in the period.


  However ,further investigation shows that rural taxation becamean acute problem because of a fast increase in rural income disparityafter the 1990s and the uneven tax and fee distribution among differentincome groups.Still using the same data from the Ministry of Agriculture,we find that rural income inequality in the 10provinces increased significantlyfrom 1986to 1999;over the same period the incidence of rural taxationamong different income groups did not change correspondingly.Figure 1and Figure 2show the rural tax burdens by income groups for 1986and1999,respectively.If we include all formal tax and informal fees paidby rural households ,the tax burden for the lowest-income group in 1986(annual per capita income less than CNY 200)was 10.5percent of netincome,while that for the highest-income group(annual per capita incomelarger than CNY 4000)was 9.5percent.However ,in 1999,the tax burdensfor the lowest-income group (with an annual per capita income less thanCNY 400)climbed to as high as 25.6percent of net income ,while thatof the highest-income group (with annual income larger than CNY 8000)was only 4.4percent.Therefore ,the increasingly regressive natureof rural taxes and the heavier burdens on poor farmers,rather than theincrease of average rural tax rate,is at the heart of the rural taxationissue in China.

  The reason that the poor farmers pay much higher shares of their incomesfor taxes and relates to the nature of the rural tax system in China‘s economic transition.Taxes on the Chinese rural households are predominantlyagricultural taxes levied on arable land.However ,since the early 1990s,an increasing share of rural income has derived from non-agriculturalsources ,such as township and village enterprises and migrants remittances,which have not been subject to state tax administration.This is especiallytrue for farmers in more developed regions.Since the poor usually comprisethe group of people with the lowest proportion of income from non-agriculturalsources ,they are more vulnerable to rural direct taxes (Tao and Liu,2005)。Therefore,rural taxation became an increasingly serious issueessentially because with rising rural income inequality the rural taxsystem failed to respond accordingly and taxes fell disproportionallyon the shoulders of the relatively poor farmers dependent on agriculture.As a result ,though the state formal tax,i.e.the agricultural tax,was ,in effect,only around 2-3percent of farmers ’average incomesacross the nation and 4-5percent in less developed agricultural regions,informal fees in many less developed regions are much higher,usuallyreaching 20-30percent of average incomes for the poor farmers.


  As a result ,though in effective tax rates the state formal tax ,i.e.the agricultural tax was on average only around 2-3%of farmers‘income across the nation and 4-5percent in less developed agriculturalregions ,informal fees in many less developed regions are much higher,usually reaching 20-30percent for the poor farmers.






村民自治和税费改革是近年来改善乡村治理的两大举措,但实践中遇到许多难题,涉及到深层次的治理结构性问题。以上题目便是出于这一思考而提出的,但因准备材料,一直未能系统成文。最近的两件事让我不得不提笔将长期以来就这一问题的所思所想写了下来,以期引起更多人参与探讨。  第一件事是近些年随着村民自治的发展,特别是村民委员会直接选举,许多乡镇干部对此忧虑重重,认为实行直选后,乡对村的控制更为困难,特别是担心税费收不起来。于是一些地方采取了一些干预措施,同时也引起了村民的强烈反弹,乡镇一时被认为是村民自治的主要阻……去看看


中国政法大学民商法博士研究生。  北京市出租汽车行业一直是管制无处不在,抱怨此起彼伏。  多方面的政府管制  北京市出租汽车管理局是北京市出租汽车行业的主管机关,2000年初撤销,其职能转由新组建的市交通局行使。出租车行业的各项管制产生于不同时期、不同阶段,其中重要的有四项:  准入管制  1992年以前,北京出租汽车数量很少,无法满足市民生活需要。短缺的原因有两个:一是准入管制,政府不批准私人开办出租车公司;二是租价管制,租价过低,无法吸引投资。  1992年春至1993年,北京出现举办出租车公司的热潮。即使这样,准……去看看


中国社会科学院台湾研究所研究员  「当代中国研究」一九九八年第一期(总第60期)  今年以来,我有幸参加了几次与台湾政界及商界的座谈会,也单独会见了一些台湾朋友,并就两岸关系的现状和未来交换了意见和看法,颇有收获。以下拟结合自己心得体会,谈有关两岸关系的几个问题。  一、“一个中国”原则问题  什么是“一个中国”原则?今年1月26日,钱其琛副总理在江泽民主席发表有关现阶段发展两岸关系、推进祖国和平统一进程的“八项看法和主张”三周年纪念会上讲了三句话:一是“世界上只有一个中国”,二是“台湾是中国的一部分……去看看


内容摘要:政府官员膨胀是中国机构改革中的难点问题。长期以来,由于对其认识不清,导致改革走了许多弯路。中国官员的膨胀问题实质上是贫困问题所导致的相对膨胀,这种膨胀与国情相适应,是多种不良因素互动的产物,带来官僚素质底下、腐败成风、权力向唯亲者集中等严重后果,影响公共领域行政效率的发挥。为此,削减官员规模与建立一种平等有序、竞争合理的官员任职机制是最为基本的对策。  我国官员规模膨胀是影响我国机构改革的重要因素,长期以来所进行的机构改革虽然在机构数目上、权力的分配上和公务人员的总数目上寻求突破,但都……去看看




海尔集团从一个亏损147万元濒临倒闭的小厂发展到今天成为中国家电行业名列前茅的国家特大型企业集团,其间除改革开放给企业创造的发展机遇,以及其创造了一整套严密的经营管理方式之外,更重要的也许是海尔管理的特色。   一、高科技高质量占据市场制高点   海尔的高质量有着丰富的内涵,它不是仅仅符合工厂或国家规定的标准即可,而是适应市场的需求,利用高科技创造高质量。有了技术上的高起点,才有质量的高起点。自1996年以来,海尔集团加大以科技为核心的技术创新工作的力度,明确技术创新三原则,即技术创新目标国际化、技术创……去看看


主题:拆迁条例修改与地方财政转型主讲嘉宾:施正文时间:2009年12月26日下午3点-5点地点:中国政法大学(蓟门桥校区)图书馆学术报告厅主办:中国政法大学法学院 承办:腾讯评论主持人:杨子云提要一、在中央和地方之间,事权与财权的不匹配造成的地方政府通过非税收的形式来取得收入,费比税多;第二,土地市场管理的不规范,也是我们形成土地财政的原因。土地一级市场是政府垄断的,尤其是我们没有赋予国有土地和集体土地同权和同价,农民的集体土地,如果要被用于城市建设,必须经过征收,这个征收是政府垄断的。提要二、中央和地方的关系,核心就是财政关……去看看


原载《中国行政管理》2010年第4期  「摘要」:过去十多年间,面对不堪重负的医疗卫生系统,很多地方政府在中央政策缺位的背景下采取多种方式进行公立医院改革。其中最为激进也是饱受争议的就是民营化模式,或称“医院改制”。这种改革有其深刻的政治、经济、社会、行政原因,用单纯的卫生经济学很难全面解释。预算软约束与“甩包袱”是其基本财政动因;地方政府的强势推动带来了条块之间的利益冲撞,在既有的制度框架内,卫生系统和地方政府进行了微妙的互动,再加上利益集团的外在影响,这些因素型塑了公立医院民……去看看


在大众传播研究领域,一个最富争议的主题之一,是大众传媒与民主政治以及公共空间的关系。(1)与此相关的,是大众在信息的生产与传播中的地位以及由此带来的文化政治问题:大众是否以及在多大程度上能够参与信息的生产与传播过程?如何保证大众能够获得应该获得的正确而可靠的信息(尤其是与他们的公民权利密切相关的涉及公共事务的信息),以便有效地参与公共事务?他们是主动地接受信息还是被动地受信息的引导、乃至完全丧失自己的独立性与主动性,沦落为传媒的奴隶?   总体来看,无论是中国还是西方的传媒与文化研究,越来越地对大众传媒对民……去看看


原载《北京大学教育评论》2006年第2期p2~11  「文章日期」2006-02-23  「作者」  「作者简介」杨东平(1949—),男,北京理工大学教育科学研究所研究员。北京100081  「内容提要」本文分析了新中国不同时期教育公平的制度特征和当前影响教育公平的主要因素,认为在1977年之后,教育公平的主要矛盾已经从教育权利平等转为教育机会均等。精英主义与大众主义两种不同的教育发展模式、转型期新的利益格局和“教育产业化”的发展路径等,造成对教育机会均等的深刻影响。  「关键词」教育公平/教育权利/教育机会  教育公平包……去看看






原载《经济社会体制比较》2009年第5期,第33-42页。  摘要:改革时期,以公安为代表的中国国家强制能力建设,先后经历了从行政分权到集权型发展两个阶段。本研究综合分析了公安分权与集权各自的目的、效果与影响,提出内外部安全环境的变化、体制自身适应存活的压力,以及中央财政汲取能力的提高,是影响国家强制能力变迁的关键变量。近10年来集权型的建设,增强了国家对强力机构的统领与规制,提高了政权体制的适应存活能力。与西方国家现代化进程中强制能力建设一味“向上收”的特征不同,面临社会稳定的考验,统分结合、专群……去看看


[摘要]建国初期(1949-1965年),西北地区群众的生活水平较低,非农业人口在粮油定量供应制度下,勉强维持生活;农村群众则在完成国家粮食上交任务和留够种子之后,只能分到极有限的口粮,长期处于饥饿线上。然而,在营养普遍缺乏的情况下,西北地区的群众常年超负荷地工作,参与了国家的种种生产活动和社会运动。他们的文化生活,带着浓厚的“国家主导”的特色,与国家的宣传与引导密不可分。  [关键词]定量供应;城乡二元体制;非农业人口;农村人口;生活状况  建国初期(1949-1965年),新中国为发展生产,建设国家,迅速提高人民群众的生活水平做了一系列……去看看