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The biggest characteristic of national tax revenue is to eliminatefiscal illusions.
Reporter: Zhao Weicheng
Reporter:In recent years, public budget reform has become focus of society. What isbudget then, and where does its importance lie?
LiWeiguang: Actually, budget is very simple, just a chart recording governmentfinancial expenses and receipts. Such chart reflects public services providedby government and expenses of activities, yet government is not a company or aproduction department in that it does not create wealth. Therefore, allgovernmental expenses come from tax, which involves many problems: Who bearsthe expenses? Who benefits from resources gained by expenses? Are distributionsof benefits fair? Are the expenses worthwhile? Such problems have more meaningsbeyond the chart itself and have influenced every aspect of social life, andtherefore, budget bears deep meaning.
In thepast, there was no modern budget. Though there may be accounts of expenses andreceipts, they fully cater to willing of the ruling class while tax payers haveno saying, which leads to the result that very often expenses of taxes areagainst willing of tax bearers. China has over two thousand years’authoritarian history, and change of system cannot be achieved in a short time,and therefore, budget becomes a sensitive chart in Chinese society amidtransformation.
A mature civil society in fact signs avisible or invisible contract with the government, which is to say I give mymoney to you under the precondition that you treat me well and enable me tolive in dignity, and in that case, I am willing to pay tax and tax evasion canbe suppressed. Fiscal budget and tax are all economic act of government, andreflect in relationship between government and people the relationship betweendemocratic politics and traditional politics. Democratic politics means that itis widely recognized that people support government and every coin comes fromfortune people themselves create while there are no fiscal illusions. The biggest characteristic of a tax country is toeliminate fiscal illusion (government pays for all kinds of social securitiesand social assistances to feed people).
Reporter:What is the present condition of government dealing with tax payers’ awakeningsense of interest? What should government do then?
LiWeiguang: To begin with, government should try to achieve openness of budgetarrangement process, and next, it can expect maturity of civil society whencitizens are not satisfied to a single bill, but more positively take part informulation of budget. Therefore, fiscal budget has exceeded the tool andtechnique layer, and become a social and political problem. To make good fiscalbudget requires government to adopt more democratic way to listen to people’ssuggestions, to satisfy people’s willing to participate in budget-makingprocess and requires coordination of the whole society.
Comparedwith tax payers’ awakening sense of interest, some government officials’ ideashave lagged behind. According to China’s national conditions, change of suchideas cannot be achieved in a hurry. I find that Shanghai is a city where themajority of tax payers have awakening senses. If let me say which city in Chinais closer to a civil society, Shanghai will exceed Guangzhou and be No.1.
Reporter:How should we supervise budget in order to guarantee biggest insurance of tax payers’rights?
LiWeiguang: Supervision can be divided into internal supervision and externalsupervision. The internal supervision means that government supervises itself,such the audit storm that we have always heard of, which means that AuditingAdministration carries out selective audit to every ministries and commissions everyyear, yet what is worth mentioning is that it is always carried out after thefact. The second supervision is called external supervision, which is so-calledexternal control. It is just like People’s Congress carries out supervision, discussionand decision of governmental expenses the name of the people. We should try toplay the function of people’s supervision and control. Some congressrepresentatives can be gradually specialized, and we can set up a professionalcommittee inside People’s Congress to invite experts to carry out routinesupervision. Such things need to be pushed forward gradually, and only after acertain period can construction of People’s Congress and routine budgetoperation gradually merge. Such issues as democracy, constitutionalism and ruleof law can yield results which are acceptable to both government and peopleonly if people express their ideas through representatives by means ofrepresentative system in order to form a beneficial interaction.
Reporter:What problems do you think our system has currently in national system reform?
LiWeiguang: The main problem is that our financial system is going upward, andtherefore, the lower status the government is, the less money it has. I favorthe situation that local governments have more available resources than centralgovernment because the value of government is to provide public service whichis main function of local governments. Therefore, local governments should haveenough power to allocate resources. Actually, financial and administrativepowers are responsibilities, and need to be highly in accordance with availableresources of governments. In the bus crash in Hunan Province, for example, Ihave watched an interview conducted in Qinling. In fact, the town head was veryworried about the safety of children, yet the report that local governmenthanded in to build a bridge got no replies, and the result was that elevenchildren were drowned. The town head said in the interview:“We don’t haveenough money and our report gets no replies.” Shortly after the accident, thebridge is built and the problem is solved, which creates such an impressionthat the bridge is gained at the cost of eleven childrens’ life while suchtragedy could have been avoided.
Localgovernments want to do their duty, yet they don’t have enough money. Franklyspeaking, central government does not need to bear so many resources because itcan choose not to do something. I personally think that compared with one morewarship, safety of schoolchildren is far more important. No one will doubt thatsafety of people is much more important than building a powerful army. Apowerful army alone does not guarantee the strength of a country. If the wholesociety is in harmony and people enjoy themselves in living in the country, apowerful army is not necessary.
Reporter:Local governments have to use 45% relative financial income to pay 75% relativefinancial expense, which causes many problems. Why do such things happen?
LiWeiguang: Strictly speaking, construction of local governments still has a longway to go. Local government in China is basically an agency of centralgovernment and lacks independence. Different from the United States where everystate has its own law, even constitution, and can decide many local things,local government in China does not have such right, and therefore, centralgovernment needs a lot of money. Moreover, even if local government gains moneyfrom the central government, it is the central government that decides theexpense because it adopts special fund transfer payment. Why do we call itspecial? It is because the central government has special orders on use offund. For example, the central government provides fund to build a highway,local government cannot spend the money elsewhere. However, local governmentfaces various public services, while the central government cannot makearrangements according to practical conditions, which will lead to lowefficiency in fund use.
Reporter:Have other countries experienced public finance reform that China now faces?Are there any lessons that we can learn from?
LiWeiguang: First of all, we must realize that tax issue, especially budget, isnot merely economy issue or political issue. In western academic field, budgetis first of all political and legal issue. Only after budget is solved in suchlevel can it moves to management and economy. Governmental budget needs not tobe as precise as that of private economy and needs no very complex ways, yet ithas to be in place both politically and legally because the basic system of acountry is politics centered. Budget system of the United States seems to bethe most complete by now. Apart from examination and approval of budget, thereis also a fund allocation right in the United States. In China, after budget ismade, the money will be directly allocated to certain department and the budgetunit will do nothing more than audit afterwards and certain supervisions duringthe process. It is not the case in the United States, where even if your budgethas been approved, you cannot get money because there is also a BudgetAllocation Committee deciding when to allocate money, how many times and howmuch money you can get each time. Additionally, the committee will also examinehow your budget goes during the process and make adjustment accordingly. Thebudget unit doesn’t have access to money during allocation because it is takencare of by another final estimate system, which accounts for the fact that weseldom hear about vital corruption in the United States.
Surely,every country has its own national condition. I am not saying that we must setup a Budget Allocation Committee, we surely can set up our own budget way.After all, these are all problems in tools and techniques. The openness offinancial budgets is a way to go. Though we do not practice western system toseparate powers, we can also achieve some effects through transparency, yetwhether we can really succeed should be proven through practice.
Introduction of Li Weiguang:
ChiefProfessor of Financial Department in Tianjin University of Finance &Economics, chief editor of academic journal, PhD supervisor, chief editor of<Modern Finance and Economics> magazine, member of Chinese FinanceSociety, member of Chinese Finance History Special Committee, member of WorldAssociation of Tax Law
