||Given that all the governments in modern countries have put stress on service performance and quality, the role played by local governments is increasingly important. The main reason is that localization can provide a region with practical needs, so as to improve citizens’ living quality. At the same time, with local decentralization, local governments can create respective regional distinctions and industrial cultures and learn from mutual competition. In the end, their citizen service performance will be further elevated reinforced.|
Currently, governments’ functions have been expanding, which results in continuing increase in expenditures. Thus, financial decentralization has become a trend of modern countries, in which local governments have to have sufficient finance in order to effectively execute policies and plans. At present, our central government has ample financial resources and is in the position to distribute them, which helps the central government promote major policies and brings about local government’s balanced development. However, in a different light, the decentralization of local finance is limited and resource distribution is out of balance. As a result, autonomous tasks have become difficult to be promoted, so the function of local autonomy cannot be well developed. Hence, the rule of thumb for wielding the substantive function of local governance is to elevate the autonomy of local finance.
To increase local revenues, the central government passed the General Principles of Local Tax Act and Fee Act in 2002 to legalize the increase of local governments’ revenues and give local governments more autonomy on their revenues. To this day, limited by pragmatic politics, the expected goal is hard to be attained in a short run, but, in order to effectively improve local financial plights, strengthen local chiefs’ responsibility for the local finance they are in charge, maintain financial discipline and build the function of authorization management, the General Principles of Local Tax Act shall be fully followed in local governments’ imposition of the special product tax, special tax and provisional tax, so as to improve local finance.
The purposes of this study are to describe and analyze local governments’ financial status, better understand the financial problems encountered by county/city governments and explore the goals to be attained for enhancing local finance, so as to put forth a strategy to reinforce financial autonomy. This study uses the research methodology including literature data collection, in-depth interviews and secondary data
analysis, in which interviews with 11 financial experts were conducted. The main contents of this study cover the analysis of local financial structure in the dimension of law, comparison of county/city governments’ financial revenue and expenditure, and analysis of Penghu County’s financial revenue, expenditure and autonomy. The study further uncovers current local financial status and the existing problems, so as to put forth a strategy of financial autonomy to enhance local finance and attain the goal of sustainable management.
By studying the overall dimension of local finance, this paper has concluded the following:
1. The expenditure structure is stiff, and the ratio of personnel expenses to annual expenses is too high.
2. Local financial autonomy shall be elevated and the subsidy system shall be enhanced.
3. Financial Distribution Act is required to be amended, but it will still not completely solve the financial problems.
4. Private participation in public construction or entrusted operation and development shall be strengthened.
5. Expenses of local non-statutory social welfare inflate and local governments’ financial capacity is deficient.
6. Local governments’ financial deficits have continued year by year, so public debts have also persistently increased.
7. Public property management shall be reinforced, so as to increase local financial revenues.
8. Even though General Principles of Local Tax Act are passed and enforced, their substantive function still cannot be wielded.
Under existing statutory laws and regulations, the financial resources of local autonomy show severe shortages, and there are many problems existing amid respective local governments. In order to elevate local financial autonomy, this paper uses Penghu County as an example, and provides recommendations from the aspects of legal systems, policies and management respectively.