Fiscal Federalism in Chinese Taxation

World Tax Journal 2011(3), pp 455-80

26 Pages Posted: 23 Apr 2012

See all articles by Wei Cui

Wei Cui

University of British Columbia (UBC), Faculty of Law

Date Written: June 1, 2011


The recent policy literature on fiscal federalism in China has concentrated on the large “vertical fiscal gap” resulting in inadequate local provision of public goods and services. Thus there is an evident interest in giving local governments more taxing powers. After a brief historical survey, the article discusses a 1993 State Council directive that centralized taxing power. This has led local governments to make use of their control over tax administration to alter effective tax rates, and to the practice of “refund after collection”, whereby local governments disguise tax cuts as expenditures, following a logic opposite to tax expenditures. This study concludes, firstly, that the allocation of taxing power is still done outside the framework of the law, and secondly, that the government has not been able to settle on a stable allocation. Skirmishes over the control of local tax reductions and preferences remain a continuous affair.

Keywords: fiscal federalism, tax legislation, centralization, local tax preferences, Chinese taxation

JEL Classification: H20, H70, H77, K34

Suggested Citation

Cui, Wei, Fiscal Federalism in Chinese Taxation (June 1, 2011). World Tax Journal 2011(3), pp 455-80, Available at SSRN:

Wei Cui (Contact Author)

University of British Columbia (UBC), Faculty of Law ( email )

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Vancouver, BC V6T1Z1

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