From the Tax-for-Fee Reform to the Abolition of Agricultural Taxes: The Impact on Township Governments in North-west China

Abstract

Over the last decade, there have been numerous reports of rural discontent and unrest over excessive local taxes and fees known as villagers' burdens. In response, the central government enacted the tax-for-fee reform (TFR) in 2002 that abolished local fees levied on individuals and rural households in favour of a single agricultural tax. In addition the central government has announced plans to eliminate the agricultural tax as well after 2006. The aim of the TFR is to streamline local revenue collection and establish a more transparent and efficient provision of services. The immediate result, however, is a dramatic reduction in the autonomy of township governments as well as the provision of local services. Poorer townships have become more dependent on county government for revenues, and these townships function more like county administrative units than local self-governments. Moreover, many services have also been cut due to a lack of local revenues. In north-west China, there has been a sharp decline in the provision of educational and medical services. The solution is an increase in county remittances, but these are slow and uneven, and the combination of reduced autonomy and services has produced a number of “administrative shells” at the township level. If the inefficacy continues, then there may be even greater rural discontent and unrest over the loss of basic services than there was over increasing villagers' burdens.