On November 12, 2013, the CPC adopted at the Third Plenary Session of its Eighteenth Central Committee the Decision on Some Major Issues Concerning Comprehensively Deepening the Reform, which points out that finance is the foundation and an important pillar of state governance. Good fiscal and taxation systems are the institutional guarantee for optimizing resources allocation, maintaining market unity, promoting social equity, and realizing enduring peace and stability. At the current stage of economic and social development, some problems in the fiscal and taxation reform remain to be solved. Recently, the magazine People’s Weekly interviewed some prominent economic and legal scholars and experts, including Professor Xi Yuemin, Head of the Economic Law Department of CASS Law Institute, on the further deepening of the fiscal and financial reform in China.

In the interview, Professor Xi Yuemin pointed out that public finance is law-based finance that emphasizes bringing financial revenue and financial expenditure under the rule of law. In 2016, the Ministry of Finance adopted the Plan for the Construction of a Law-Based Financial System, which stresses that measures must be taken to further separate the revenues of the central and local governments, and vigorously implement the power list system and the responsibility list system. This plan is of great importance to regulating local taxation power in accordance with law. This year, a new step was taken in the reform of the tax system when the National People’s Congress approved the plan made by the State Council for merging the state and local taxation organs at and below the provincial level, thereby providing organizational guarantee for centralizing local taxation power and reducing the cost and raising the efficiency of taxation. In the future, China should establish a mechanism for the review of the legality of major financial decisions made by governments at various levels and the system of accountability for major financial decisions, and rely on various supervision and accountability systems to ensure the legality of local financial policies. Although, after the 2015 revision of the Legislation Law, China has emphasized the principle of law-based taxation, the provisions on the tax preference power in the current laws and regulations are still too vague. As a result, it is not clear which departments of the central and local governments enjoy taxation power, including tax preference power. In the future, China should further strengthen the exercise of the legislative power on taxation and develop a reasonable design of tax exemption and reduction system.