Taxing time for local governments

Overview

China has been recentralising its tax system since 1994 in a bid to lessen provincial and sub-provincial autonomy in fiscal policy. Despite growing centralisation of revenue raising, expenditure responsibilities remain highly decentralised. This increases financial pressure on provincial and local government, particularly since last year's abolition of the agricultural tax – the main part of the local government tax base. The result is growing reliance on off-budget income sources,...