Introduction

Setting the Agenda

“The agricultural tax has become history” (People's Daily, December 31, 2005). The Chinese government announced abolition of agricultural taxes on January 1, 2006. This was a goal of the “rural tax and fee reform” (hereafter referred to as rural taxation reform) initiated in the late 1990s and an important turning point in rural public policy in China. This chapter examines the redistributive impact of rural taxation using the 1995 and 2002 CHIP surveys and the administrative village survey of 2002. The analytical focus is on changes in tax regressivity between 1995 and 2002.

An empirical study of the redistributive impact of rural taxation is important not only because ad hoc collection of taxes and levies – so-called arbitrary charges, fines, and levies (luan shoufei, luan fakuan, luan tanpai) – has been one of the hottest issues in rural public policy throughout the 1990s, but also because a critical aspect of the Chinese local politico-economic system, that is, the multilayered and decentralized local administrative/fiscal system, is embodied in the issue. So far, however, few empirical studies, with some exceptions such as Khan and Riskin (Chapter 3 in this volume) and Tao, Liu, and Zhang (2003), have used nationally representative microdata to examine the redistributive outcomes of rural taxation.

The structure of this chapter is as follows. In the latter half of this section, the background of the topic is discussed. Section II summarizes the process of rural taxation reform.