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Unnecessary fees

(China Daily)
Updated: 2008-08-26 18:41

The central government's decision to abolish administrative fees for individual-owned businesses and market vendors from September 1 will not just promote employment growth. It will also help pave the way for budgetary reforms to include all government revenues in the annual budget.

Local agencies of the State Administration for Industry and Commerce (SAIC) have collected the administrative fees for about two decades. Such fees were previously targeted at establishing local markets, covering small business owners and vendors' service charges from local market watchdogs and recovering some of the operational costs of local SAIC authorities.

These administrative fees have constituted an important revenue source for local authorities. But many individual business owners have blamed the fees for being too burdensome, almost twice as much as business taxes.

The latest move to scrap administrative fees for small businesses reflects both the change of the government's role in the economy and the growth of the country's fiscal strength.

On the one hand, as the Chinese economy shifts away from central planning toward market competition, SAIC agencies are no longer directly involved in the establishment of marketplaces but serve as regulators to safeguard market order. The change of role naturally makes it unnecessary for the government agencies to continue to collect related fees.

On the other hand, a swelling national coffer has already enabled the government to cut its dependence on such administrative fees. In spite of a gradual slowdown of the national economy, China's tax revenues still soared by one-third in the first half of this year with a fiscal surplus of more than 1 trillion yuan ($145.97 billion).

Clearly, by cutting costs for individual business owners, the cancellation of administrative fees will encourage more people to start businesses. For China that will have 10 million people entering the workforce every year between now and 2010, such a boost to job creation is always more than needed, not to mention the extra unemployment pressure from domestic economic slowdown and weakening external demand.

More important, the new effort to standardize administrative fees will create conditions for the authorities to press ahead with reforms to include all government revenues into a unified budget. The current government budget covers mainly tax revenues.

It is believed that the scrapping of unnecessary administrative fees will facilitate such budgetary reforms and ensure better use of public funds.