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Dec 15, 1993: State Council decides to introduce tax sharing system

CPC Encyclopedia

On December 15, 1993, the State Council decided to reform the taxation system and introduce a tax sharing system so that the central government could have more money.

The reform demarcated the tax control boundaries of local and central government.

According to the system, each provincial-level region would contribute a certain proportion of its taxation revenues to State coffers. While the proportion of contribution varies from region to region, on average the central government nominally could have a 60%-70% share of the nation's fiscal revenues while the rest would go to the regional governments.

Afterwards, the central government would give back some funds to regional governments according to agreed proportions. The reform greatly boosted the central government's revenues.