 Between
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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