[Academic Journal] China State Finance, Issue 10, 2024.
[About the Author] Yang Canming, Professor, PhD in Economics, Honorary Doctorate of the Sapienza University of Rome, currently serves as the President and Vice Secretary of the CPC Committee of Zhongnan University of Economics and Law (ZUEL), and PhD Supervisor. Additionally, he is the Vice President of the Society of Public Finance of China, Vice Chairman of China Teaching Guidance Committee for Public Finance Majors of the Ministry of Education, a discipline expert on Expert Committee on Higher Education Philosophy and Social Sciences (Marxist Theoretical Research and Construction Projects) of the National Textbook Committee, one of the talents in National Talent Project, "Famous Cultural Talent" awarded by the Publicity Department of the CPC Central Committee, the talent of "the Four Batches" Talent Project, Member of the 8th Applied Economics Discipline Review Group of the State Council, one of the first talents in "New Century National Hundred, Thousand and Ten Thousand Talent Project", an expert of the "Program for New Century Excellent Talents in University" of the Ministry of Education, expert of the training program of the "Cross-century Qualified Disciplinary Leaders" by the Ministry of Finance, and expert with special allowances from the State Council. His research mainly focuses on basic fiscal theories and fiscal policies. He has led more than 20 national, provincial and ministerial level projects, including the Major Program of NSSFC, Major Program of Philosophy and Social Sciences Research of the Ministry of Education, Entrusted Program of the General Office of the CPC Central Committee, Program of NSSFC, Program of Fok Ying Tung Education Foundation of Ministry of Education, such as "Research for Promoting the Common Prosperity of All People", "Research on Regulating the Order of Income Distribution", "Research of Local Financial Behavior and Its Regularization", and "Research of the Chinese Government Procurement". The Public Finance of China compiled under his leadership was selected as one of the first Chinese economics textbooks. A number of his research reports have received important instructions from leaders at the provincial and ministerial levels or have been adopted by government departments. Yang has published more than 10 monographs and translations, including the Research on Regulating the Order of Income Distribution, Market Structure and Government Economic Behavior, and Fiscal Theory and Institutional Innovation. He has released over 160 academic papers in various important journals, including Social Sciences in China, Economic Research Journal, Journal of Management World, Finance & Trade Economics, Public Finance Research, and Economic Perspectives. More than 30 of his research results have been reprinted in Xinhua Digest, Chinese Social Science Digest, and Replicated Journal of the Information Center for Social Sciences of RUC. With his achievements, he has won over 20 important awards, such as the first prize of Outstanding Scientific Research Achievements Award of Higher Education Institutions of China, the second prize of the National Teaching Achievement Award for Higher Education, other national awards, the first prize of Excellent Achievements in Social Sciences of Hubei Province, the first prize of Development Research Award of Hubei Province, the first prize of Outstanding Research Achievements of the CPC Hubei Provincial Committee, the first prize of the Excellent Teaching Materials of the Ministry of Finance, the Soft Science Professional Research Award of China, and the ACCA Outstanding Achievement Award, among others. He was awarded the favorite president of university students.
[Main Views] New quality productive forces are led by innovation, characterized by high technology, high efficiency, and high quality. It can be realized through revolutionary technological innovation breakthroughs, innovative allocation of production factors, and deep industrial structure optimization. General Secretary Xi Jinping pointed out that "We lead industrial innovation through scientific and technological innovation, actively fostering and developing new quality productive forces." Xi urged efforts to actively promote new industrialization, transform and upgrade traditional industries, foster emerging industries, plan ahead for future industries, and quicken pace in building a modern industrial system underpinned by advanced manufacturing. It can be seen that the core of new quality productive forces is to attach importance to the deep integration of scientific and technological innovation and industrial innovation. Take innovation as guidance and ultimately implement it in the industry.
It should be noted that the development of new quality productive forces is both an innovation issue at the level of productive forces and a reform issue at the level of production relations. General Secretary Xi Jinping pointed out that "to develop new quality productive forces, it is imperative to deepen reform across the board so as to create a new type of relations of production that is compatible with the development of new productive forces." This requires removing obstacles and impediments to the development of new quality productive forces and establishing an institutional and governance system that supports the development of new productive forces.
Comprehensively deepening reforms is closely and uniquely related to the fiscal and tax system reform. Preparations must be made before action. The reform and opening-up that have had a profound impact on our country began with fiscal reform as a vanguard. Over the past decade, the deepening of the fiscal and tax system reform has served as a "breakthrough" and "vanguard" in comprehensively deepening the reforms. Public finance is the foundation and important pillar of national governance. Currently, further comprehensively deepening the reforms also requires a shift from a policy-oriented mode to a reform-oriented mode. Therefore, following the Central Economic Work Conference in 2023 and the fourth meeting of the Central Commission for Comprehensively Deepening Reform, this year's "Government Work Report" once again clearly proposed "planning for a new round of fiscal and tax system reforms." This is necessary for consolidating and enhancing the positive trend of economic recovery, as well as an inevitable requirement for developing new quality productive forces.
Each era has its specific themes. In the 1980s, China mainly focused on devolution of power and transfer of profit to incentivize all sectors of society to participate in reform and economic development. The tax-sharing system reform in 1994 mainly addressed issues of high demand for local investment and the central government's insufficient macroeconomic regulation. The subsequent fiscal and tax system reform aimed to further improve the tax-sharing financial system from government budget accounts, centralized treasury receipts and payments, government procurement, performance budgeting, and information management of finance and taxation. However, previous reforms primarily resolved income ratio, not simultaneously addressing expenditure responsibility ratio, resulting in a mismatch between financial resources and authority of office and leaving unresolved issues concerning the division of authority of office and expenditure liability between the central and local governments, and fiscal system reform below the provincial level.
To resolve these legacy issues, it is necessary to plan a new round of fiscal and tax system reform, specifically from the following six aspects:
(I) Defining the boundaries between government and market. Following the concept of an efficient market and a well-functioning government, we should fully leverage the market's decisive role in resource allocation while also enhancing the government's role to ensure a reasonable division of labor and effective collaboration between the government and the market in developing new quality productive forces.
(II) Sorting out authority of office and expenditure liability between central and local governments. The proportion of expenditure by China's central government is relatively low compared to international standards. Therefore, some authorities of office and expenditure liabilities could be transferred upward to alleviate the expenditure liabilities of local governments while also reducing efficiency losses from transfer payments. Especially, the central government should take on more authority of office and expenditure liabilities in the promotion of common prosperity and coordinated regional development.
(III) Stabilizing the macro tax burden. It will be difficult for us, a super-large country, to cope with various risks and challenges without sufficient fiscal revenue. Therefore, tax and administrative fee cuts should primarily focus on structural reductions, emphasizing precision and effectiveness to both support innovation and development while maintaining stability in the macro tax burden. Additionally, consideration can be given to expanding the collection scope of value-added tax to include high-end service industries, and raising the rates of resource taxes and environmental taxes to better promote green development.
(IV) Further reforming and improving the tax system and fiscal expenditure system. By utilizing tax incentives and optimizing expenditures, we encourage and support basic scientific research, major technological projects research, and commercialization of scientific and technological achievements. We encourage and support the reconstruction of the industrial foundation, high-quality development of the manufacturing industry, rational layout of emerging and future industries, and the optimization and upgrading of industrial and supply chains.
(V) Preventing and mitigating local debt risks. In addition to improving the normal monitoring mechanism, prudently resolving the stock of hidden debts, resolutely curbing the increase in hidden debts, promoting the market-oriented transformation of platform companies, and improving the supervision and accountability mechanism, it is more crucial to clarify the relationship between central and local governments' authority of office and expenditure liability through a new round of fiscal and tax system reform to create conditions for fundamentally addressing local debt issues.
(VI) Promoting the transformation and upgrade of fiscal and tax management through digitization. We should fully leverage the achievements of modern scientific and technological revolution to upgrade fiscal and tax management to digital management, which is also an issue concerning new quality productive forces in the field of finance and taxation. It is necessary to strengthen the top-level design, consolidate the development foundation, reform the corresponding systems and mechanisms, and eliminate potential barriers in digitization, to fundamentally improve fiscal and taxation governance level and capacity.