Glamor Economics

Chapter 99

Chapter 13 Section 9 Gratuitous transfer of financial funds - transfer payments

Transfer payment, also known as unpaid expenditure, mainly refers to the activities of transferring financial funds in certain forms and channels between governments at all levels to solve financial imbalances. It is a kind of unpaid expenditure provided to supplement public goods. The unilateral free transfer of financial funds reflects a non-market distribution relationship.

There are three main modes of transfer payments: one is top-down vertical transfer, the other is horizontal transfer, and the third is a mix of vertical and horizontal transfers.The principles that regulate the transfer payment system are: the principle of fairness, the principle of efficiency and the principle of the rule of law.

Before the reform of the tax-sharing system was implemented in 1994, my country did a lot of work on financial transfer payments. After the reform of the tax-sharing system was implemented in 1994, the concept of transfer payments was introduced from the West.Since 1995, the central government has officially implemented the transfer payment method for the transitional period.According to the expenditure analysis framework in the International Monetary Fund's "Government Finance Statistics Manual", there are two levels of government transfer payments. One is international transfer payments, including external donations, external supply of goods and services, and payment of dues to multinational organizations; It is a domestic transfer payment, including transfer payments from the government to families such as pensions and housing subsidies, subsidies from the government to state-owned enterprises, and transfers of financial funds between governments.Fiscal transfer payment, as we generally call it, refers to the transfer of fiscal funds between governments, which is an important part of the central government's expenditure and an important budgetary revenue of local governments.

In western countries, fiscal expenditures are mainly classified into purchase expenditures and transfer expenditures.my country's financial transfer payment system was established on the basis of the tax-sharing system in 1994. It is a set of three parts consisting of tax rebates, financial transfer payments and special transfer payments, and is mainly based on transfer payments from the central government to local governments. A transfer payment system with Chinese characteristics.

Transfer payments include government transfer payments, enterprise transfer payments and intergovernmental transfer payments.

1.Government transfer payments.Most of them have the nature of welfare expenditures, such as social insurance welfare allowances, pensions, pensions, unemployment benefits, relief funds and various subsidies, etc. Agricultural product price subsidies are also one of the government's transfer payments.Because the government's transfer payment actually returns the country's fiscal revenue to individuals, some Western economists call it negative taxation.

2.Business transfer payments.Usually refers to corporate grants or donations to non-profit organizations, and personal injury compensation for non-corporate employees.Transfer payments have objectively narrowed the income gap and played a positive role in keeping the level of aggregate demand stable, reducing the magnitude and intensity of aggregate demand swings, and stabilizing the social economy.Usually when a depression comes, total income falls, unemployment increases, and social welfare expenditures allocated by the government must also increase.In this way, the purchasing power can be enhanced and the level of effective demand can be increased, thereby suppressing or alleviating depression.When there is excessive demand in the economy, the government can reduce the amount of transfer payment, which can restrain the increase of the level of aggregate demand.

3.Transfer payments between governments.Generally, it is a subsidy from the upper-level government to the lower-level government.The amount of transfer payments is generally calculated based on some social and economic indicators, such as population and area, and some social and economic activities undertaken by the government, such as education, public security, etc., based on unified unit expenditure standards.Inter-governmental transfer payments are mainly to balance the gaps in government revenue in various regions due to different geographical environments or different levels of economic development, so as to ensure that the governments of various regions can effectively provide services for the society in accordance with the unified national standards.

Although my country has not promulgated a transfer payment law, it has already practiced transfer payments. The forms of transfer payments between governments in my country include the following categories:
1.General transfer payments, or institutional transfer payments, are transfer payments implemented under the current financial system.It is the most basic and main form.

2.special transfer payment.It is a special subsidy provided by the higher-level finance in order to achieve a specific policy and economic goal or special task.

3.special transfer payments.Special subsidies paid by the higher-level government in the event of force majeure or major policy adjustments by the state.

4.tax return.Based on the needs of macro-control, the central government returns part of the centralized tax revenue to the local governments.

[links to related words]

Subsidy expenditures Subsidy expenditures include social security expenditures and financial subsidies.Among them, social security expenditure is a form of expenditure used for the operation of the social security system to provide protection for residents' minimum living standards.It is a means of adjusting distribution relations, alleviating income and property gaps, ensuring social fairness, and maintaining social stability.

Financial transfer payment Financial transfer payment is a subsidy expenditure arranged by the central finance to the local finance in order to make up for the financial gap in areas with weak fiscal strength.Fiscal transfer payment is an important means to narrow the financial gap between regions, and it is the main component of fiscal transfer payment.It mainly includes: general transfer payment, transfer payment for salary adjustment, transfer payment for ethnic minority areas, transfer payment for rural tax and fee reform, financial subsidies for year-end settlement, etc.

Special transfer payment Special transfer payment is a subsidy fund set up by the central government to achieve specific macro policies and business development strategic goals, and is mainly used in various public service areas related to people's livelihood.Local finance needs to use funds according to prescribed purposes.

(End of this chapter)