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Further Tax and Fee Reductions in Sight

China plans to abolish taxes and fees specific to farmers and build a public finance system that covers both rural and urban areas.

Speaking at a high-profile meeting that ended in Beijing Tuesday, Premier Wen Jiabao said the country will also improve the efficiency of rural grassroots governments and forge a lasting mechanism to sustain farm income growth while capping financial burdens.

The efforts will help deepen the landmark tax-for-fees reform initiated four years ago, Wen said at the two-day national conference.

The tax-for-fees experiment began in east China's Anhui Province in 2000. Under the scheme, a standardized tax system was created to replace the range of taxes, fees and levies previously imposed on farmers.

Before the reform, Chinese farmers often had to pay charges in addition to legally raised taxes. Local administrations have used various pretexts to set up exorbitant fees, fund-collection programs and fines.

"For the past four years, the reform has drastically lightened the burden on farmers, standardized rural tax and fee charging system, and improved relations between rural officials and farmers," Wen said.

Stressing the importance of continuing the reforms to strengthen coordinated development between urban and rural areas, Wen said the central authorities have decided to abolish the agricultural speciality product tax and begin agricultural tax reduction or exemption programs this year.

In his government work report to the country's top legislature - the National People's Congress - in March, Wen promised the centuries-old agricultural taxes - which stood at around 8 percent of farming income last year - will be scrapped in five years.

Wen asked for conscientious efforts to ensure transfer payments from the central government are made in time to help local revenues, which in the past derived partly from agricultural taxes.

"To further the rural tax-for-fees reform and alleviate farmers' burden at the root level, it is crucial to push forward the accessory reforms in a proactive and steady way," the premier said.

These reforms include: streamlining township governments, improving the rural educational system and increasing financial input in rural social undertakings.

"The reforms will see to it that grassroots governments operate efficiently, that the rural compulsory education and other social undertakings proceed in a sound fashion, and the burden on farmers will not bounce back up," Wen said.

As the tax-for-fees reform deepens, it is vital for public finance to play a bigger role in rural areas, said Han Jun, a senior researcher with the State Council Development Research Center - a key government think-tank.

The operation of rural governments, development of infrastructure in townships and villages and health care systems all need financial support, as grassroots governments can not collect funds directly from farmers, Han said.

(China Daily July 7, 2004)

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