Former Finance Minister says Beijing must spend more via fiscal deficits and centralize responsibilities, rather than delegating them locally. Also, raise the retirement age and VAT rate, he says.
Thanks for making these public debates about fiscal reform accessible to an international audience. One reform I would suggest is to establish an equivalent of the US Congressional Budget Office (CBO) which independently assesses the government’s fiscal budget to see how sustainable it is. Ideally, the government needs to manage sustainability over business cycles, spending more during bad times, and tightening during good times. A CBO-like institution would help institutionalise this, pushing the government to “tighten up” during good times, and “loosen” during downturns.
Raising tax rates is always difficult politically, but most countries (including in the West( achieve this through inflation. I sometimes come across proposals to “benchmark” tax thresholds with inflation, so that thresholds rise with inflation, but I think this would be a bad idea given how difficult it is politically to raise nominal tax rates. Better to let inflation gradually erode the tax thresholds.
Thanks for making these public debates about fiscal reform accessible to an international audience. One reform I would suggest is to establish an equivalent of the US Congressional Budget Office (CBO) which independently assesses the government’s fiscal budget to see how sustainable it is. Ideally, the government needs to manage sustainability over business cycles, spending more during bad times, and tightening during good times. A CBO-like institution would help institutionalise this, pushing the government to “tighten up” during good times, and “loosen” during downturns.
Raising tax rates is always difficult politically, but most countries (including in the West( achieve this through inflation. I sometimes come across proposals to “benchmark” tax thresholds with inflation, so that thresholds rise with inflation, but I think this would be a bad idea given how difficult it is politically to raise nominal tax rates. Better to let inflation gradually erode the tax thresholds.