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1949 and 1978, China exercised a fiscal and taxation system adapted to
a system of planned economy. Financial policy thus covered every aspect
of social life. But since the introduction of the policies of reform and
opening to the outside world, China's finance sector has broken away from
the unified distribution of revenues and expenditures system that complied
with a highly-concentrated system of planned economy, and gradually carried
out reforms of the fiscal and taxation system. The reform is aimed at
diversifying financial policy and distributing mostly by coordinating
benefits for the purpose of controlling economic operations indirectly
and guiding resource distribution. Since 1984, the Central Government
first practiced different responsibility methods for revenue and expenditure
in different places, and then shifted the national budget system from
single entry to double entry. In 1992, in order to meet the needs of micro-control,
the financial system started to be greatly reformed. By 1994, a structure
of financial system meeting the needs of the socialist market economy,
with tax distribution as the core, has been primarily formed. Its major
contents are: (1) on the basis of the taxation system, to establish a
multi-level financial system that rationally divides central taxes, local
taxes and taxes shared by the central and local governments; (2) in the
aspect of taxation policy, to set up a new system of turnover tax with
added value as the mainstay, and consumption and business taxes as supplements,
and at the same time to establish and perfect the income tax system; (3)
to practice a double-entry budget system consisting of regular and constructive
budgets; (4) to promote the balance of total economic output and the economic
structure by means of comprehensively utilizing the budget, taxation,
the state debt and allowances. |
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