The TA aims to support the preparation of a public finance reform strategy in the PRC. The TA will identify priority reforms for fiscal policy to play a leading role in promoting a shift toward a more inclusive economic model, a more balanced income distribution, and improved living standards. By reviewing national and international experiences, the TA will provide an in-depth analysis of the priorities for fiscal and taxation reform in the PRC to underpin government's efforts to restructure the economy and balance income distribution. The analysis will focus on three main areas: (i) public finance management reform; (ii) taxation and tax administration reform; and (iii) optimal revenue levels to address development needs amid declining growth.
|Project Name||Public Finance Development Strategy 2020|
|Country||China, People's Republic of|
|Project Type / Modality of Assistance||Technical Assistance
|Source of Funding / Amount||
|Strategic Agendas||Inclusive economic growth
|Drivers of Change||Governance and capacity development
|Sector / Subsector||
Public sector management - Decentralization - Public administration - Public expenditure and fiscal management
|Gender Equity and Mainstreaming|
|Description||The TA aims to support the preparation of a public finance reform strategy in the PRC. The TA will identify priority reforms for fiscal policy to play a leading role in promoting a shift toward a more inclusive economic model, a more balanced income distribution, and improved living standards. By reviewing national and international experiences, the TA will provide an in-depth analysis of the priorities for fiscal and taxation reform in the PRC to underpin government's efforts to restructure the economy and balance income distribution. The analysis will focus on three main areas: (i) public finance management reform; (ii) taxation and tax administration reform; and (iii) optimal revenue levels to address development needs amid declining growth.|
|Project Rationale and Linkage to Country/Regional Strategy||
The TA supports the PRC's government reform priorities and is aligned with the objectives of ADB's Country Partnership Strategy (CPS) 2011-2015. The PRC's 12th Five-Year Plan (2011-2015), acknowledges the important role to be played by fiscal policy to narrow income inequalities and support economic restructuring toward a more consumption-based growth model. The CPS pursues inclusive growth to foster balanced and equitable development, a target to which the proposed fiscal reforms will certainly contribute. The TA builds on the findings of ADB's TA 7568-PRC: Supporting Reforms in Taxation and Budget Management, and TA 7763-PRC: Strengthening Fiscal Policy and Public Finance Reform over the Medium-Term.
The impact will be strengthened fiscal policy and taxation system in the PRC.
The outcome will be improved fiscal and taxation framework in the PRC.
The output will be a report containing a strategy to guide public finance reform until 2020 to promote inclusive growth and a more balanced income distribution in the PRC. The report will comprise 3 sub-reports analyzing the priorities of fiscal and taxation reform from different angles: (i) public finance management reform to define the functions of the government at all levels; (ii) taxation and tax administration reform to balance income distribution and eliminate tax distortions; and (iii) forecasting optimal revenue levels to address development needs amid declining growth to ensure an equitable provision of public services.
Sub-report 1 will focus public finance management to: (i) define the role of the government and its expected functions to address market failures; (ii) establish well-functioning intergovernmental working arrangements guided by improved public finance management at all levels of government; (iii) optimize public expenditure to ensure an efficient and equitable delivery of public services; and (iv) analyze innovative approaches for the effective delivery of public services including the promotion of various forms of partnerships with the private sector.
Sub-report 2 will review existing legislation on taxation and look into policy actions to reform taxation and tax administration through: (i) greater taxation progressivity in relation to good international practices to balance income distribution; (ii) measures to broaden and simplify the tax structure and adjust tax rates to eliminate distortions in the system; and (iii) reforms to address the mismatch in revenue and expenditures through increased fiscal transfers and improved tax administration at all levels of government.
Sub-report 3 will (i) review and identify weaknesses in revenue collection and sharing to reform expenditure assignments; and (ii) analyze the fiscal policy implications of slowing economic growth to estimate optimal levels of revenue for the sustainable provision of public expenditure, in particular on education, health, and social security.
The final report will include a synopsis containing wide-ranging and detailed policy recommendations to guide the implementation of the identified reform priorities targeting senior policy decision makers in the PRC.
|Impact||Strengthened fiscal policy and taxation system in the PRC|
|Description of Outcome||Improved fiscal and taxation framework in the PRC|
|Progress Toward Outcome||
Work in progress toward project outcome.
Consultations with the PRC Ministry of Finance were held during the inception and midterm on the directions of the studies and their impact on PRC's fiscal and taxation policy framework; as well as during the final workshop on policy recommendations for fiscal and tax reforms.
The outputs of the studies provided policy recommendations for the PRC's 13th Five Year Plan preparation. The recommendations formed part of ADB's dialogue with the PRC Government in October 2014, to help the nation transition to a high-income country. These recommendations were discussed ahead of the formulation of the PRC's 13th Five-Year Plan, 2016 2020.
|Description of Project Outputs||Strategy to guide public finance reform until 2020 to promote inclusive growth and a more balanced income distribution in the PRC|
|Status of Implementation Progress (Outputs, Activities, and Issues)||
1. Consultants were fielded in August 2013. Draft inception report was submitted on 13 September 2013. Midterm reports were submitted on 10 March 2014. Final report was submitted in September 2014.
2. An inception workshop was conducted on 22 September 2013 in Beijing with the participation of 8 high level officials from the Ministry of Finance and 5 ADB staff. The Directors General of the Policy and Fiscal Affairs Department and International Department, Ministry of Finance opened the workshop together with the Director General, East Asia Department, ADB. Five eminent Chinese experts on fiscal policy led the fruitful discusions with the six consultants from the Research Institute of Fiscal Science and the participants. The discussions focused on the obejctive, framework, scope, and timing of the study on public finance development strategy for PRC.
4. The midterm workshop was held on 19 March 2014 in Beijing, with the participation of five high ranking officials from the Ministry of Finance, led by the Deputy Director General of Policy and Fiscal Affairs Dept.; Deputy Director General of International Dept.; Director of International Dept.; Deputy Director of Policy and Fiscal Affairs Dept.; and the Officer from the TA Division, International Dept. Seven ADB staff contributed to the discussions. Five fiscal and taxation Chinese experts and five consultants provided their experts' opinion and thinking on the issues at hand while thirteen team members from the Research Institute for Fiscal Science joined the discusssion. The discussion focused on the function and optimization of public finance in the PRC; taxation and tax administration reform; and optimization of fiscal revenues.
5. A study visit of 6 PRC Ministry of Finance officials to the Republic of Korea and Hong Kong, China was conducted from 24-31 August 2014 to examine the fiscal policy reform experience of these two economies and provide best practice suggestions to the PRC. The visit was valuable to the PRC Ministry of Finance as it provided insights into the basic conditions and characteristics of the fiscal and taxation management systems of these two countries and their implications for PRC.
6. The TA final review workshop was held on 23 September 2014 in Beijing, with the participation of 6 high-level officials from the Ministry of Finance, 1 international expert, 6 PRC experts, 17 researchers and policy experts and 3 ADB officials. The workshop focused on key fiscal policy recommendations for the PRC's 13th Five-Year Plan.
Summary of Environmental and Social Aspects
|Stakeholder Communication, Participation, and Consultation|
|During Project Design|
|During Project Implementation|
|Consulting Services||A total of 25 person-months of individual consulting services (one international consultant for 2 person-months and 6 national consultants for a total of 23 person-months) will be required. The international and national consultants would be selected and engaged on an individual basis by ADB in accordance with ADB's Guidelines on the Use of Consultants (2010, as amended from time to time).|
|Responsible ADB Officer||Fernandez Lommen, Yolanda|
|Responsible ADB Department||East Asia Department|
|Responsible ADB Division||Office of the Director General, EARD|
Ministry of Finance
Sanlihe, Xicheng District
People's Republic of China
|Concept Clearance||06 Apr 2013|
|Fact Finding||13 May 2013 to 15 May 2013|
|Approval||10 Jun 2013|
|Last Review Mission||-|
|Last PDS Update||13 Mar 2015|
|Approval||Signing Date||Effectivity Date||Closing|
|10 Jun 2013||09 Jul 2013||09 Jul 2013||30 Jun 2015||-||-|
|Financing Plan/TA Utilization||Cumulative Disbursements|
|400,000.00||0.00||100,000.00||0.00||0.00||0.00||500,000.00||10 Jun 2013||276,281.25|
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|Title||Document Type||Document Date|
|Public Finance Development Strategy 2020: Technical Assistance Completion Report||TA Completion Reports||Jan 2016|
|Public Finance Development Strategy 2020||Technical Assistance Reports||Jun 2013|
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