BEIJING, Mar. 10 (Xinhuanet)-- For the first time, the report on the government's budget was not read out at the annual session of the National People's Congress (NPC).

    The small, practical change in the agenda of the country's top legislature, aimed at increasing the session's working efficiency since deputies can read copies of the report by themselves, mirrors significant adjustments to fiscal policy that underlines the nation's continued development.

    Policy-makers have planned a smaller fiscal deficit for the central government and a cut in the amounts of long-term treasure bonds, down by 19.8 billion yuan (US$2.4 billion) and 30 billion yuan (US$3.6 billion) respectively from last year. They have demonstrated unprecedented enthusiasm for the development of many policies key to establishing a harmonious society.

    For instance, more funds will be spent boosting grain production, rural development and the end of agricultural taxes.

    Such a shift in the focus of fiscal priorities marks a stark departure from the country's tradition of stoking economic growth with strong fiscal support.

    A pro-active fiscal policy was introduced seven years ago to offset the negative impact of the Asian financial crisis. By substantially increasing government expenditure on infrastructure investment, this policy, along with a similarly aggressive monetary policy, played a remarkable role in cushioning the national economy against deflationary pressure.

    But a 9.5-per-cent GDP growth in 2004 and the robustness of the Chinese economy has laid a solid foundation for this pro-active fiscal policy to be phased out.

    Surely, less investment will contribute to lowering the growth rate to its target level of 8 per cent this year. Breakneck growth of investment has pushed the country to the limits in terms of energy and resources and should certainly be reined in.

    However, a more fundamental reason behind the central government's pulling back of its growth-centred policies while the country's tax revenue remains buoyant lies elsewhere.

    There is a growing consensus in our society on the necessity to pursue prosperity through a more balanced and sustainable development.

    China's national fiscal revenue soared by 21.4 per cent to a record high of more than 2.63 trillion yuan (US$318 billion) last year, and it is projected to rise by about 11 per cent this year.

    To make most use of the nation's swelling coffers, we must spend more on social projects. Only when fiscal policy is transformed from a stimulus to economic growth to a booster of social causes can many of the social problems we currently face be properly addressed.

    It is an encouraging sign of change, as the budget report indicates, that the central government will further increase expenditure on re-employment, education, agricultural production, social security and environmental protection this year.

    However, to make public finance best serve the public, reforms are needed not only on the expenditure side. Tax reforms are also crucial to realizing social equality.

    Much has been said about taxation reforms, like unifying income taxes between domestic and foreign-funded companies, introducing a fuel tax and real estate tax, and a change in personal income tax.

    Some existing tax codes are outdated, and some new taxes are needed to bring about fairness.

    To perfect our public finance, the Chinese Government should seize the country's current fiscal soundness to advance its reforms on revenue and expenditure.

(Source: China Daily)