The Abolition of the Agricultural Tax
From 2000 China carried out rural tax-for-fee reform, piloted in Anhui and later extended nationwide, abolishing township pooling charges, rural education levies and other fees. In March 2004 Wen Jiabao's government work report pledged to abolish the agricultural tax within five years; in March 2005 the target was brought forward to 2006. On 29 December 2005 the NPC Standing Committee repealed the Agricultural Tax Regulations adopted in 1958, and the tax ended nationwide on 1 January 2006. Officials said farmers' burdens fell by more than 100 billion yuan a year, while researchers pointed to reduced township autonomy and weaker local public services.
Background: The Burden on Farmers
On 3 June 1958 the 96th meeting of the First NPC Standing Committee adopted the Agricultural Tax Regulations of the PRC, which set the national average rate at 15.5 percent of normal annual output. In practice the levy later also included a tax on special agricultural products and a livestock tax.
In the 1990s the burden on farmers became the focus of rural problems. On top of the agricultural tax, farmers paid township pooling charges, village retention fees and education levies, along with a range of ad hoc assessments and fund-raising demands. Researchers note that after the 1994 tax-sharing reform county and township finances tightened and local governments relied more heavily on fees collected from farmers, and that excessive burdens repeatedly triggered discontent and conflict. In early 2000 Li Changping, Party secretary of Qipan Township in Jianli County, Hubei, wrote to Premier Zhu Rongji that "farmers are truly suffering, the countryside is truly poor, and agriculture is truly in danger"; the letter drew wide attention after it was reported by Southern Weekend.
The Tax-for-Fee Pilots (2000–2003)
From 1993 more than 40 counties in seven provinces, including Taihe in Anhui, Zhengding in Hebei and Xinhuang in Hunan, experimented with rural tax-and-fee reform. In March 2000 the CPC Central Committee and the State Council issued the Notice on Carrying Out Pilot Work for Rural Tax and Fee Reform (Central Document No. 7 of 2000), making Anhui a province-wide pilot. Summarized as "three abolitions, two adjustments and one reform," it centered on abolishing township pooling charges, rural education levies and other fees as well as mandatory labor contributions, folding farmers' obligations into a revised agricultural tax and tax on special agricultural products. In 2002 the pilot was extended to 16 more provinces including Hebei, and in 2003 it was rolled out nationwide.
From Reduction to Abolition (2004–2005)
In his Report on the Work of the Government on 5 March 2004, Premier Wen Jiabao announced: "Starting this year, the agricultural tax rate will be lowered gradually, by an average of more than one percentage point a year, and the agricultural tax will be abolished within five years." That year the tax on special agricultural products other than tobacco was abolished, and Jilin and Heilongjiang piloted a full exemption from the agricultural tax.
The government work report of 5 March 2005 went further: the 592 key counties in the national poverty-alleviation program would be exempted from the agricultural tax, the livestock tax would be exempted entirely, and "next year the agricultural tax will be exempted throughout the country. The original goal of abolishing the agricultural tax in five years can be reached in three." By the end of 2005, 28 provinces had fully exempted the agricultural tax, and 210 counties (and county-level cities) in Hebei, Shandong and Yunnan had done so as well.
On 29 December 2005 the 19th meeting of the Tenth NPC Standing Committee decided that the Agricultural Tax Regulations adopted by the First NPC Standing Committee would be repealed with effect from 1 January 2006. The same day President Hu Jintao signed Presidential Order No. 46 promulgating the decision. Officials described this as the end of the "imperial grain tax" that had lasted more than two thousand years.
Fiscal Arrangements and Supporting Reforms
According to Finance Minister Jin Renqing, speaking to Xinhua in December 2005, once the agricultural tax was fully abolished in 2006 farmers' annual burden would be more than 100 billion yuan lower than in 1999, before the tax-for-fee reform — about 120 yuan per person. By 2005 the central government had allocated a cumulative 183 billion yuan in transfer payments for the reform and the abolition of the tax. Officials also called for supporting reforms of township institutions, the management of rural compulsory education and county-township fiscal arrangements, and planned to waive tuition and miscellaneous fees for rural compulsory education within 2006 and 2007.
Assessments and Research
Officials presented the abolition as part of the policy of "industry nurturing agriculture and cities supporting the countryside"; the agricultural economist Song Hongyuan calls it the next major reform since the founding of the PRC after rural land reform and the household contract system, one that opened a strategy of "industry nurturing agriculture." John James Kennedy's research in north-west China found that the tax-for-fee reform sharply reduced the autonomy of township governments and their provision of public services, made poorer townships more dependent on county finances, and led to marked declines in educational and medical services. Guohui Wang argues that the reform was pushed through by "principle-guided policy experimentation" with origins in the period of Jiang Zemin's leadership.
Narrative Comparison
| Source | Narrative |
|---|---|
| The 2005 government work report and Finance Minister Jin Renqing's Xinhua interview | Officials presented the full abolition of the agricultural tax as a strategic measure for resolving the "three rural issues": it regularized the relationship of interests between the state and farmers, embodied the principles of "industry nurturing agriculture, cities supporting the countryside" and "giving more, taking less and loosening control," and ended a history of more than two thousand years in which farmers paid the "imperial grain tax." Officials also stressed that exempting the tax was only the first step of rural tax and fee reform, and that consolidating it required more complex and difficult reforms of township institutions, rural compulsory education and county-township finances to prevent farmers' burdens from rebounding. |
| John James Kennedy, The China Quarterly, No. 189 (2007) | Kennedy notes that the tax-for-fee reform aimed to streamline local revenue collection and establish more transparent and efficient provision of services, but that its immediate result was a dramatic reduction in the autonomy of township governments and in local services: poorer townships became more dependent on county revenues and functioned more like county administrative units than local self-governments, and educational and medical services in north-west China declined sharply. County remittances were slow and uneven, producing a number of "administrative shells" at the township level; he argues that if this continued, the loss of basic services could cause even greater rural discontent than the burdens on villagers had. |
| Ren Yuqi (deputy to the Tenth NPC), personal account (China Economic Weekly, 2009) | Ren Yuqi, a deputy from Hunan to the Tenth NPC, recalled that after his election in 2003 he organized survey teams that visited more than 50 townships in Hunan. Farmers told him they lost 20 to 40 yuan on every mu they planted once costs were deducted; one township finance official calculated for him that "the township's agricultural tax quota was 3.45 million yuan, but only 80 percent could actually be collected, and by the most conservative estimate the direct cost of collection was as high as 1.057 million — 38.3 percent." Of the 73 townships he surveyed, he said, "not one was free of debt." On 7 March 2004, speaking in the Hunan delegation at the Second Session of the Tenth NPC, he proposed that the agricultural tax be abolished as soon as possible and submitted a motion to that effect. |
Key Milestones
- NPC Standing Committee adopts the Agricultural Tax Regulations
The 96th meeting of the First NPC Standing Committee adopts the Agricultural Tax Regulations of the PRC, setting a national average rate of 15.5 percent of normal annual output.
- Government work report pledges abolition within five years
At the Second Session of the Tenth NPC, Wen Jiabao announces that the agricultural tax rate will be cut by more than one percentage point a year on average and the tax abolished within five years.
- Government work report brings full exemption forward to 2006
Wen Jiabao announces exemption for 592 key poverty counties and a full exemption from the livestock tax, with the agricultural tax to be exempted nationwide the following year — three years instead of the planned five.
- NPC Standing Committee repeals the Agricultural Tax Regulations
The 19th meeting of the Tenth NPC Standing Committee repeals the Regulations effective 1 January 2006; Hu Jintao signs Presidential Order No. 46 promulgating the decision.
- Agricultural tax ends nationwide
The Agricultural Tax Regulations cease to have effect and the agricultural tax is abolished throughout the country.
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