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Increase local tax revenues
(China Daily)
Updated: 2004-08-02 16:55

It was reported that recently, in Central China's Hunan Province, a local coal mine accident killed 16 people. An investigation shows that the main reason for the accident in that city, which has seen some accidents before, was local governmental officials' protection of the coal mine owners, with some officials even owning shares in those coal mines.

To prevent such tragedies, collusion between officials and coal mine owners should be strictly controlled and cracked down upon. Officials receiving bribes must be punished.

But why are local officials and coal mine owners engaged in such collusion?

Officials do personally benefit from bribery. But in some cases, they may also want to add to local revenue by allowing unsafe mines to operate.

The amount of bribes officials received is not astronomical. And the city where the coal mine accident happened is poverty-stricken. The local annual financial expenditure of 160 million yuan (US$19.3 million) could not make ends meet. To raise more funds, some officials violated the law and regarded local mines as their tax sources.

The 1994 tax reform, which re-allocated tax revenues between central and local governments, became a watershed for local revenues. Before, local revenues accounted for 70 per cent of total national revenues. After the reform, their revenues were chopped to 48 per cent.

In addition, 70 per cent of all the nation's government officials are at county and township levels, while they carry out their duties depending on only 40 per cent of the total revenues. Meanwhile, the fiscal transfer from the provincial and municipal levels to county and township levels is not enough. The financial difficulties of counties and townships have been intensified.

To pool money for their maintenance, some local governments have to collect huge fees from local residents and enterprises.

The aforementioned city has limited tax sources. Under the financial pressure, some local officials have colluded with coal mines, resulting in a series of legal violations.

In this way, although the officials involved in this accidents have been punished, it is hard to say whether similar legal violations will not occur if local governments continue to operate with inadequate revenues.

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