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Tax-for-fees Reforms to Widen

China hopes to boost rural consumer spending by spreading "tax-for-fees" reforms to more than 10 regions next year.

The reform is aimed at lightening rural residents' tax burdens by abolishing some fees and charges, thus increasing these people's income, said Ni Hongri, a researcher at the Development Research Center under the State Council.

"The slow growth of rural residents' income has long been a headache for the Chinese Government because it greatly affected the implementation of the demand-stimulating policy," Ni said.

If consumption in rural areas cannot be increased, the full expansion of domestic demands, a strong engine for economic growth, will not be realized, she said.

Chen Xiwen, deputy director of the center, said the slow income growth will hinder the overall economic development of the nation and undermine social stability.

"The tax-for-fees reform will make a huge impact on rural economy and lead to other changes," Chen said.

The Chinese Government has ranked increasing rural residents' income among its top tasks next year, he said.

Zhang Xueying, an economist with the State Information Center, said the reform has already started on a trial basis in East China's Anhui Province.

Results have been promising as farmers are pleased to be rid of outrageous abuses of local authorities that take money from their pockets at random, he said.

As many as 50 assorted charges - from a fee on pig slaughtering to one for road construction - were removed last year in Anhui, slicing 31 per cent off rural residents' tax burdens there.

"With more income to spend, rural residents are capable of increasing investment in farming production to promote productivity," Zhang said.

But tax cuts are only the first step to raise rural residents' incomes, Zhang said.

"Accelerating the farm produce processing will also contribute to the added value of farm produce, thus benefiting the wallets of the farmers," he said.

Chen Xiwen said China also needs to simplify administrative structure in rural areas.

"Institutional reform is the key to increasing farmers' incomes and reducing their financial burdens," Chen said.

Other reforms may include the removal of township governments, giving farmers a bigger say in managing village affairs, invigorating county economies and cutting the size of government institutions in rural areas by a large margin.

"The Chinese Government should encourage farmers to go to the cities because farmland in China cannot accommodate as many farmers as there are," Chen said. "More farmers should turn to non-farm work to seek their fortune."

In this case, China should prioritize the development of township businesses and the expansion of small towns, create more job opportunities for farmers and accelerate the resettlement of excess rural laborers.

(China Daily December 10, 2001)

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