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State Council issues guideline on division of financial powers

Updated: Aug 24,2016 8:45 PM

The State Council on Aug 24 released a guideline on promoting the reform of dividing financial powers and expenditure responsibilities between central and local governments to improve their efficiency in providing public services.

Financial power is the government’s responsibility to provide public services with funds. And a clear division of responsibilities between central and local governments ensures that they properly exercise their financial powers.

Since the reform and opening-up, the fiscal relationship between central and local governments has changed a lot, from the earliest highly centralized fiscal management system to the reform of taxation system in 1994, forming a clear framework for power division, according to the guideline.

It said the general principle is that financial powers should be decided by the central government.

The reform is aimed at promoting and improving the division of powers between central and local governments, and speeding up the responsibility division of governments below provincial levels.

The reform will reinforce the central government’s fiscal powers in guaranteeing national security, safeguarding a nationwide unified market, expressing social justice and promoting coordinated regional development.

Funding for basic public services closely related to local residents’ standard of living should be allocated by local governments, the guideline said.

It also urged reducing any overlapping administrative powers held by local and central governments to clarify responsibilities undertaken by governments at different levels.

Meanwhile, basic public services with clear strategic intention and cross-regional administration advantages will be designated a shared financial responsibility of both central and local governments.

The funds for financial powers that belong to the central government should be allocated by central finance. And in principle, local governments should use their own resources to exercise their financial powers.

Expenditures for basic public services involving nationality, citizens’ rights, national unified market and free flow of elements will be undertaken by the central and local governments according to a formula.

Provincial level governments should take the central government’s practices as reference, and determine the expenditure responsibilities of governments below the provincial level according to their financial systems and local financial situations, the guideline said.

The responsibility division reform will be carried out in public services related to national defense and safety, foreign affairs and public security in 2016. And in 2017-18, the reform is expected to make big breakthroughs in public service sectors, including education, medical health, environmental protection and transportation.

In 2019 to 2020, reform in major areas will be basically completed, and a clear financial responsibility division between central and local governments will be formed.