Taxation reform benefits Chinese farmers

11/28/2002
China Daily

The taxes and fees imposed on 620 million of China's rural population were slashed this year by 30 billion yuan (US$3.6 billion), a year-on-year drop of about 30 percent, thanks to an ongoing reform of transforming administrative fees into taxes in rural areas.

Yan Junchang, a farmer in his 60's in Xiaogang village in Fengyang County, Anhui Province, said the taxes and fees imposed on each villager stood at about 70 yuan this year, compared to around 100 yuan last year.

"Our tax burden is much lighter," said Yan.

This is the most significant reduction on the financial burden of farmers in nearly two decades in China, which has been troubled by unbearable financial burden on its largely low-income farmers.

Yan's words have been echoed in interviews with several hundred farmers in east China's Jiangsu, Anhui and Shandong provinces.

Huang Weijian, an senior official of rural taxation reform under the State Council, said before the reform the 800 million rural population had to pay a total of 120 billion yuan (US$14 billion) each year in taxes and fees, which works out to about 130 yuan (US$15) per head.

The figure is little for an average Chinese urban resident, but means quite a lot for most Chinese farmers, since it exceeded their "monthly per capita disposable cash income."

Qiu Xiaohua, deputy director of the National Bureau of Statistics, said the average farmer netted only 120 yuan (US$14) monthly.

While inspecting Anhui Province earlier this year, Chinese Vice-Premier Wen Jiabao noted the heavy financial burden and high farming costs of grain growers -- the overwhelming majority of Chinese farmers -- who can only make ends meet by working small plots of farmland, about one-seventh of a hectare each.

The vice-premier warned that the heavy financial burden is a major obstacle to rural development in China and has discouraged farmers from growing grain.

According to Huang, of the 120 billion yuan paid by farmers in taxes and fees, less than one quarter went to the central government as agricultural taxes.

The remaining three quarters, a large 90 billion yuan (US$10.9 billion), was used to pay the wages of the grass roots government officials and staff of locally run schools, to build roads and other local infrastructure projects, and even to pay for meals of local officials and cover the losses of township firms.

Niu Shulian, a farmer in Niuzai village in Henan Province, complained that villagers were forced to pay the 850,000 yuan (US$103,000) debt for a money-losing firm.

The ongoing pilot reform program is designed to curb the increasing financial burden on the country's farming population through reforming its taxation system and streamlining grass-root governments.

To help finance the reform, the central government allocated about 16.5 billion yuan (US$2 billion) this year to local governments to compensate any lost revenues, according to Finance Minister Xiang Huaicheng.

In addition, the provincial areas also streamlined grass-roots governments and officials dependent on farmers' money, cutting those on the payroll by about one-fifth.

Han Jun, a research fellow of the Development Research Center of the State Council, described the reform as one of the revolutionary changes to rural areas during the past five decades, which will facilitate rural economic development and stability.

The five decades witnessed the Land Reform in early 1950s, in which land was confiscated from landlords and distributed to peasants shortly after the founding of the People's Republic of China, and the introduction of the household contract responsibility system about two decades ago, which led to a drastic rise in grain output and farmers' income.

The just-concluded 16th National Congress of the Communist Party of China set increasing farmers' income as one of the country's major tasks.

It outlined measures to create jobs for farmers and increase farmers' income, such as encouraging the surplus work force in rural areas to move into non-farming sectors and urban areas.