Lawmakers call for expediting fiscal reforms

BEIJING - Senior lawmakers Friday stressed the importance of hastening fiscal system reforms in order to cope with economic difficulties.

Members of the Standing Committee of the National People's Congress (NPC) expressed concerns about a slowdown in government revenues and the soaring debts of local governments when reviewing a State Council report on the central government's final accounts for 2012 and the 2012 audit report from the National Audit Office (NAO), which were both submitted on Thursday.

The reforms are necessary in order to transform China's economic growth pattern and solve financial problems, said Wu Xiaoling, a member of the NPC Standing Committee and former vice governor of the People's Bank of China, at a panel discussion.

"A number of problems exposed by the NAO report have turned up year after year, as they are mainly rooted in the current fiscal system," Wu said.

The NAO report warned that debts owed by 18 provincial-level governments and municipalities have risen sharply, hitting 3.85 trillion yuan ($626 billion) by the end of last year.

Some governments have relied too much on land revenues and new borrowing to repay old debts, according to the report.

In many cases, local governments have not had enough fiscal revenue to support all of the public services that the central government asks them to provide, forcing them to borrow money, Wu said.

As the country continues efforts to replace the business tax with a value-added tax (VAT) in order to boost the service sector, the tax revenues of local governments might continue to drop, she said.

Meanwhile, slower economic growth will affect fiscal revenues at both the central and local levels, she said.

"We need to adjust the taxation system so that local governments will have stable revenues," she said.

Essential reforms are also needed in light of other upcoming challenges, she said, citing a current liquidity shortage that she believes resulted from active fiscal and monetary policies in previous years.

Lawmakers also urged local governments to prepare themselves for thinner wallets.

"Fiscal revenues might not be able to maintain high growth as in previous years," said Lyu Zushan, a member of the NPC Standing Committee and former governor of east China's Zhejiang Province.

Slow and moderate growth might be the norm for the next few years, he said.

According to the State Council report, the central government had a fiscal revenue of 5.62 trillion yuan ($910 billion) last year, a year-on-year increase of 9.4 percent, compared with 20.8-percent growth in 2011.

On Thursday, Finance Minister Lou Jiwei told lawmakers that the central government may be under great pressure to achieve this year's target of 7-percent growth.

"The government should think about how to balance lower revenues and more expenses. Further expanding the financial deficit is not a good solution," Lyu said.