Rural Taxation Reforms and Compulsory Education Finance in China

In recent decades, the responsibility for the financing of compulsory education in rural China has rested with townships and villages which, with limited tax authority and uneven revenue capacity, increasingly relied on a plethora of arbitrarily imposed fees for funding. To reduce farmers’ fiscal burdens, in 2000, the central government installed a series of rural taxation reforms. Correspondingly, the central government shifted the administrative responsibilities of rural compulsory education to the county level in 2001, and implemented a series of policies to make up for the loss of revenues to education. Using a provincial-level dataset from 1998 to 2006, we examined whether and how the rural taxation reforms affected the adequacy and equity of compulsory education finance in China, addressing related theoretical and policy implications from the perspective of intergovernmental fiscal relations.