Q: How much does the central government allocate its annual budgetary expenditure to agriculture and to what areas? What is the goal of the current tax reform in rural areas?

A: Statistics show that State budgetary expenditure for agricultural development has increased from 257.3 billion yuan (US$31 billion) in 2000 to 398.4 billion yuan (US$48 billion) in 2004, up 13.7 percent annually. Budgetary expenditure for agriculture accounted for 15.87 percent of the total budgetary expenditure on average annual basis.
 
The State budgetary expenditure for agricultural development is mainly to the following areas:

First, to compensate for provincial government income shortfalls caused by their reducing agricultural taxes;

Second, to the impressive tax remission on agriculture and animal husbandry nationwide will be subsidized by special transfer payments from the state finances and to provide direct subsidies to farmers for grain production, such as the purchase of quality seeds and farming machines;
 
Third, to give rewards and subsidies, in the form of transfer payments, to main grain-producing counties according to their sowing areas, grain output and the amount of commodity grain.

Fourth, to set up a special fund to facilitate construction of small water conservancy projects, while continuing to finance construction of medium and large scale water conservancy works;
 
China's agricultural tax system is a heterogeneous composition of various taxes, including agricultural tax, additional tax, tax on native products, slaughterhouse tax, as well as collection of education fees and various administrative fess charged by local governments. Statistics show that there were as many as 99 items of tax and fee charges approved by the central government alone. In addition there were 43 more items that required farmers' to support, either in cash, in kind and in labor. One of the main purposes of the agricultural tax is to greatly reduce taxes and fees for farmers, so as to create necessary conditions for a unified tax system that will be applied to both urban and rural areas.

China has been reducing its agricultural taxes rate at an average annual speed of one percent starting from 2002. To date, 26 of the country's 31 provinces, municipalities and autonomous regions have eliminated all agricultural taxes. Farmers saved more than 200 million yuan. It is estimated that by end of 2006, all agricultural taxes will be exempted in the country.