China plans fiscal reforms; aims to reduce central, local government overlap

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[August 24, 2016]  BEIJING (Reuters) - China will kickstart fiscal reforms in areas of national defense and basic public services this year, with plans to focus on education, healthcare and environmental protection in 2017-2018, the State Council said on Wednesday.

China's national flag flutters at a business district in Beijing, October 29, 2015. REUTERS/Kim Kyung-Hoon
 

Reforms will "moderately increase" spending responsibilities of the central government in order to ensure public security and equality, and local governments will be given authority to manage some public services in order to better meet local needs, the announcement said.

China will clarify responsibility for government spending between national and local governments, and will also reduce overlapping responsibilities, the State Council said in a notice published on its website.

"Overlapping central and local government fiscal responsibilities must be reduced and standardized," the notice said.

China has been looking to centralize more fiscal powers in order to streamline spending and revenue collection, especially as local governments face mounting debt woes and falling tax revenues.

The country has rolled out a new value added tax system that is collected centrally, replacing a business tax system that was collected by local governments.

(Reporting by Elias Glenn and Kevin Yao; Editing by Simon Cameron-Moore)

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