5. We will promote fiscal and taxation
reforms.
We will deepen the reform of
the fiscal management system. We will improve and standardize the system of
transfer payments from the central to local governments, raise the scale and
proportion of general transfer payments, and increase spending on public
services. The central government has allocated 846.702 billion yuan in fiscal
transfer payments to local governments, an increase of 137.417 billion yuan or
19.4%. We will improve the method of calculating standard revenue and
expenditure items and strengthen support for no-development zones and restricted
development zones. We will also encourage these regions to strengthen ecological
and environmental protection, and promote development in development priority
zones. Fiscal transfer payments to cities that once depended on resources that
are now exhausted will be increased to help them gradually solve longstanding
social problems. The procedure for examining and approving new transfer payments
must be strictly followed to make the distribution scientific. We will continue
reviewing current special transfer payments, combine items that have similar
purposes and eliminate or reduce items whose term has expired, items of a
one-time nature and items that do not need to be retained to meet the needs of
macroeconomic regulation. The procedure for introducing policies related to
special transfer payments will be standardized to keep the overall load on local
budgets within an acceptable range. A total of 44 billion yuan, an increase of
ten billion yuan, has been allocated for rewards and subsidies to adjust and
improve the incentive and restraint mechanisms for alleviating fiscal problems
of county and township governments, and to create a mechanism for guaranteeing
minimum fiscal expenditures for counties and townships. We will improve the
fiscal systems at and below the provincial level, accelerate the reform to put
county public finance directly under the management of provincial governments
and township public finance under the management of county governments, and
gradually establish a mechanism to direct more revenue toward governments at
lower levels in order to better equalize basic public services.
We will promote reform of the taxation system. We
will unify the income tax systems for domestic and overseas-funded enterprises,
fully implement the new Law on Corporate Income Tax and regulations on its
implementation, and ensure that the reform of the corporate income tax system
proceeds smoothly. We will continue the trial VAT reform in the old northeast
China industrial base and in 26 old industrial cities in the central region. A
nationwide implementation plan will be worked out. We will reform the resource
tax system. We will implement the new regulations for the tax on farmland used
for nonagricultural purposes. We will study measures for combining the urban
construction and maintenance tax and education surcharge systems for both
domestic and overseas-funded enterprises. We will carry out reform of the
individual income tax, raise its earnings threshold, and reduce the tax load on
low-income workers.
We will improve the budgetary management system. We
will improve the way surplus revenue in the central budget is used. Beginning in
2008, we will in principle consolidate all surplus revenue in the central budget
into the central budget stability and regulation fund and incorporate it into
the following year's budget rather than finding new ways to spend it. The
exceptions to this principle are as follows: increases in expenditures that are
required by law, regulations or the fiscal system; necessary expenditures to
reduce the deficit or pay long overdue debts; and special one-time expenditures.
This will make it easier to ensure that key expenditures are met, that budget
management is standardized, and that budget constraints are strengthened. We
will carry out comprehensive budgeting, study ways to improve the system of
standards for expenditures, improve examination and approval of items, institute
rolling management of budgetary expenditure items and increase the number of
departments required to report their budgets to the NPC. We will actively carry
out trial evaluations of budgetary performance and explore ways to setup a
system for publicizing the results of performance evaluations in order to
improve the level and quality of public goods and services. Central, provincial,
municipal and prefectural governments will extend the reform setting up a
centralized treasury payment system to all subsidiary bodies within their
jurisdictions that prepare budgets. The reform will gradually expand to include
government-managed funds and extra budgetary funds. In order to improve the
system for managing the outstanding balance of government bonds, we will
energetically promote the reform to make government bonds subject to market
forces. We will expand the scope of trials of a budget system for managing state
capital. The system for managing state assets held by administrative bodies and
government-affiliated institutions will be further improved. Studies will be
carried out to establish a standard budgetary system for the social security
fund.
We will continue to deepen overall rural reform. The
central government has allocated 15 billion yuan to strongly support debt
reduction for rural nine-year compulsory education as a starting point for
reducing all rural debt. We will look for a way to set up a new mechanism for
funding rural public service programs. We will carry out trials of a
comprehensive reform to reduce the economic burden on farmers from water fees.
Also, the burden on farmers due to regional or industrial differences will be
gradually reduced.
We will speed up reform of the income distribution
system. We will work hard to get public finance to play a significant role in
adjusting the pattern of income distribution. We will gradually increase the
proportion of national income going to individuals and raise labor's share of
the primary distribution of income. We will adopt fiscal and taxation policies
to increase incomes of rural residents, urban recipients of cost of living
allowances and other low-income people. We will support the implementation of a
minimum wage standard for enterprises, gradually raise it, and setup a mechanism
to increase the pay of enterprise employees regularly and to guarantee that they
get paid. We will ensure tha tall enterprise employees have basic medical, basic
old-age, unemployment, workers' compensation and other insurance. We will
support the efforts to strengthen collection of social security contributions
and increase the percentage of people contributing. We will increase transfer
payments to people in financial difficulties to ease their burden of paying for
education, medical services, old-age insurance, housing and fees. We will give
the individual income tax a bigger role in adjusting income distribution,
improve tax collection for high-income workers, and reduce the tax load on
low-income workers. Oversight of income distribution will be tightened for SOEs
and state-owned financial institutions, especially in monopoly industries. The
pattern of income distribution to civil servants will be further standardized.
We will improve oversight and inspection to uncover and strictly deal with any
violation of regulations concerning the granting of allowances or subsidies.
We will support the deepening of reform of the banking and related systems. State-owned financial institutions must properly carry out their duty to provide capital, and we will actively yet prudently carry out the reform to convert the Agricultural Bank of China and other key state-owned financial institutions into stockholding companies and transform the China Development Bank into a commercial institution. In addition, we will strongly support reform of the investment system.
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