How many provinces and cities "feed" China? From the perspective of transfer payments, we can see that "receipts cannot offset expenses"
In recent years, fiscal revenue and expenditure data in various regions have attracted considerable attention, with claims such as "multiple provinces and cities cannot receive enough to support their expenses" and "several provinces and cities" supporting China "often circulating on the internet. In fact, these seemingly plausible views are only directly derived from the local fiscal revenue and expenditure data, and ignore the key factors of China's fiscal system, especially transfer payments.
Transfer payment, which means that the higher-level government allocates funds to the lower level government free of charge.
In 1994, China implemented a tax sharing fiscal system reform and established a framework for intergovernmental fiscal relations. In terms of income division, the reform of the tax sharing system has divided different types of taxes into central tax, central and local shared tax, and local tax, gradually forming the current pattern of central and local income division. At the same time, we will gradually establish and improve a transfer payment system. The transfer payments from the central government to local governments and from local higher-level governments to lower level governments are mainly used to solve the problem of regional financial imbalance and promote the equalization of basic public services between regions.
Only by understanding this institutional framework can we have a complete and comprehensive view of local fiscal revenue and expenditure. If we only compare income and expenditure at the local level, many places are in a state of "income not enough to cover expenses". In fact, China implements a regional income redistribution mechanism mainly based on transfer payments. Local government income is not only the "local income" announced by various regions, but also needs to focus on the factors of higher-level government transfer payments.
The Budget Law stipulates that the general public budget revenue at all levels of a local government includes the local revenue, tax refunds and transfer payments from the higher-level government to the local government, and the revenue from the higher-level government's transfer. This means that local fiscal revenue is not only from the local level, but a considerable portion comes from central transfer payments.
The recently released report of the State Council on the situation of fiscal transfer payments shows that the central government has increased its efforts to transfer payments to local governments, balanced the allocation of financial resources between regions, and promoted coordinated regional development. Central to local transfer payments have become an important and relatively stable source of income for local governments at all levels, especially in central and western provinces where central transfer payments account for a high proportion of local expenditures. From specific data, China continues to increase its efforts in transferring payments to local governments, with the central government's transfer payments to local governments exceeding the 10 trillion yuan mark this year. Taking into account a series of factors, it is untenable to only consider the viewpoints of "income not offsetting expenses" and "income not making ends meet" at the current level of income and expenditure.
Transfer payment is a common practice in market economy countries, with the main function of regulating the allocation of financial resources between upper and lower level governments and different regions, and filling the financial gap in fulfilling local government responsibilities. There are significant differences in resource endowments and development conditions among different regions in China, leading to differences in economic development and fiscal revenue levels. It is necessary to promote resource allocation and coordinated development through the transfer payment system. From the implementation situation, more and more funds are flowing to underdeveloped and financially disadvantaged areas, effectively promoting regional financial balance, promoting equalization of basic public services, and ensuring the implementation of major national policies, supporting sustained and healthy economic and social development.
Of course, while the transfer payment policy continues to unleash its effectiveness, there will also be some problems and shortcomings, such as the unreasonable structure of transfer payments, the need to improve the effectiveness of transfer payment management, and the once highly concerned phenomenon of "sprinkling pepper noodles". In recent years, the reform of transfer payment management has been continuously promoted, especially with the central government increasing the scale and proportion of general transfer payments, regulating the allocation and use of special transfer payments, strengthening transfer payment performance management, and promoting the disclosure of transfer payment information. The management level and policy effectiveness have significantly improved.
The intergovernmental fiscal relations and transfer payment system are closely related to the national economy and people's livelihood, and standardization and rule of law are crucial. Next, while deepening reforms, it is necessary to urgently improve the legal system of transfer payments, and make comprehensive and systematic provisions on the functional positioning, classification system, establishment procedures, distribution management, etc. of transfer payments. Through scientific and reasonable transfer payments, we can effectively promote financial sinking, better safeguard and improve people's livelihoods, and promote regional coordinated development.