The land transfer fee problem must be tackled at its root
To tackle the land transfer fee problem, it is not enough to fix the ills of the moment; we must also look to the long term. If reform is carried through, the accumulated ills of land transfer fees will naturally be resolved.
As the first nationwide large-scale audit of land transfer fees gets underway, the management of land transfer fees has once again drawn attention. Data from the Ministry of Land and Resources show that nationwide land transfer revenue rose from 129.6 billion yuan in 2001 to more than 4 trillion yuan last year, an increase of more than 30 times over 13 years, with a cumulative total of more than 19.4 trillion yuan. Yet most of this huge sum, nearly 20 trillion yuan, has been kept in “closed operation”, leading to constant violations and breeding corruption. This is also borne out by the audit reports on land transfer fees in some regions in 2008 and 2010.
The problems in land transfer fee management are not the result of a lack of systems, but the result of systems not being complied with. The management and use of land transfer fees are regulated by the Land Administration Law, the Notice of the General Office of the State Council on Standardizing the Management of Revenue and Expenditure from the Transfer of State-owned Land Use Rights, the Measures for the Management of Revenue and Expenditure from the Transfer of State-owned Land Use Rights, the Measures for the Management of the Collection and Use of the Paid Use Fee for Newly Added Construction Land, and the Opinions on Further Strengthening the Budget Management of Local Government Funds, among other regulations, in which the “two separate lines for revenue and expenditure” and strengthened coordination and alignment with the public finance budget are basic requirements.
Yet no matter how “full” the systems are, they cannot withstand the “bare bones” of real-world operation: some keep false accounts to reduce fixed expenditures, some fail to include them in local fund budget management, and some embezzle and misappropriate them, and these are by no means isolated cases.
⟧ Non-compliance with systems is indeed attributable to loopholes in the systems and to lawbreakers seizing the opportunity for rent-seeking, but the more fundamental reason lies in the fact that the land transfer fee account, while recording the main source of extra-budgetary local revenue, also “records” heavy local interest demands and the inertia of local governance built up over many years. Developing the economy and developing public services are the two major tasks of local governance. Yet a single model of economic growth leads to a single source of local fiscal revenue, which limits the space for local governance. Faced with increasingly complex local affairs and rigid public expenditures, relying on land price differentials to supplement local fiscal revenue and making full use of local debt platforms has become a common choice for many localities. Whether it is the obligation of local governance or the obligation to repay debts, this objectively poses a challenge to the management of land transfer fees.
At the subjective level, moreover, the budget management level in many localities remains low, and there is even less understanding of scientific management of land transfer fees, which should be included in the fund budget. In addition, local spending decisions have yet to form a mechanism-based coordination model with people's congresses and other institutions, so land transfer fees often drift outside supervision.
It can be said that the chaos surrounding land transfer fees is a concentrated manifestation of such ills as the mismatch between local fiscal authority and administrative authority, lagging budget management, and unscientific decision-making mechanisms. Therefore, only by rooting out these ills at the root can land transfer fees become a clear account.
First, the governance of the land transfer fee problem must be combined with the ongoing deepening reform of the fiscal and tax systems. The focus of the new round of fiscal and tax system reform is an appropriate adjustment of the relationship between the central and local governments, so as to achieve as much relative unity as possible between local fiscal authority and administrative authority. Once localities can obtain long-term stable fiscal revenue commensurate with the affairs they manage, their dependence on land finance will be reduced, and an environment can take shape in which land transfer fees are used for designated purposes and used transparently.
The land transfer fee problem also reflects the practical need to accelerate the revision of the Budget Law. Improving the scientific nature of budget preparation and implementation is the core of the Budget Law revision. How local fund budgets can be coordinated with fiscal budgets, and whether people's congresses can exercise full-process supervision over fund budgets, will make land transfer fees an important criterion for assessment.
The problems existing in land transfer fees also call for the optimization of local governance. With the prospect of localities obtaining more fiscal authority, how to regulate that authority and how to improve the decision-making level of local spending is a major issue. Clarifying administrative authority is likewise an important part of deepening reform.
To tackle the land transfer fee problem, it is not enough to fix the ills of the moment; we must also look to the long term. Launching a large-scale audit of land transfer fees is a first move to create an environment for reform, while continued reform in related fields is the decisive move. If reform is carried through, the accumulated ills of land transfer fees will naturally be resolved.