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The third plenary session of the 18th CPC Central Committee made it clear that China should advance the reform of the fiscal and tax systems to build a modern public finance system. How is the reform of China's fiscal and tax systems progressing? What new reform measures will be rolled out this year? Thank you.

Xu Hongcai:

Thank you. Your questions are about reforms. Indeed, our reforms in recent years have been advanced according to decisions and arrangements of the CPC Central Committee and the State Council. Especially since the third plenary session of the 18th CPC Central Committee, we have taken moves across the board, achieved breakthroughs in many areas, made further progress and achieved remarkable results. The framework of a modern public finance system has been basically established to provide strong support for promoting the sustained and healthy economic and social development and modernizing China's system and capacity for governance.

First, new progress has been made in the reform of fiscal systems. A fiscal relationship between the central and local governments built upon clearly defined powers and responsibilities, with appropriate financial resource allocation and great balance between regions, has gradually taken shape. We kept the current fiscal pattern of central and local governments stable, advanced the reform of defining the respective fiscal powers and expenditure responsibilities of central and local governments, and unveiled reform plans involved in 11 areas, including basic public service, education, and science and technology. We further rationalized the division of revenue between central and local governments, clarifying the ‘50/50 split' for VAT revenue, and adjusting and improving the mechanism for sharing VAT credit refunds. We deepened the reform of the financial transfer payment system and built a system for transfer payments, including general transfer payment, transfer payment of common authority of central and local governments, and special transfer payments, which has promoted coordinated regional development and equal access to basic public services.

Second, significant progress has been made in reforming the taxation system. A standardized and fair taxation system, featuring scientific tax classifications, optimized structure, and sound laws, was built and improved. I spoke more about the taxation system in my first answer. Generally speaking, we have intensified efforts to administer taxation in accordance with the law and completed legislative work on 12 tax categories. Moreover, we have comprehensively advanced VAT reform, improved systems of consumption tax and business income tax, and advanced the reform of resources and environment taxation system. A system for taxing personal income on the basis of both adjusted gross income and specific types of income has taken shape, and large-scale cuts on taxes and fees have been implemented.

Third, major achievements have been made in reforming the budget management system. A transparent budget system has been basically established with clearly defined, evidence-based and binding rules. In the past decade, the Budget Law and the regulations on implementation of the Budget Law were revised and decisions and opinions on deepening reform of the budget management system were released. A multi-year budget-balancing mechanism was established and medium-term financial planning management was implemented. We strengthened the united management of fiscal revenue, standardized the management of expenditure budgets, and strengthened financial support for major decisions and arrangements. We strengthened budget management of government departments and units and implemented lifecycle management of projects. We innovatively implemented a mechanism to directly allocate budgetary funds to prefecture- and county-level governments to ensure that funds go straight to prefecture and county governments and directly benefit businesses and people. Moreover, we strengthened management of local government debt, advanced performance-based budget management across the board, made institutional arrangements to make budgets more transparent, and comprehensively implemented a reporting system for state-owned asset management.

Next, we will continue to follow the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, ground our efforts in the new development stage, apply the new development philosophy, and create a new pattern of development. In accordance with the requirements of systematic integration and efficient coordination, we will advance reform of the fiscal and tax systems to make finance better play its role as the foundation of state governance and promote high-quality development.

Thank you.