Fines and fees fall heaviest on the smallest companies

Editors note: The State Council, China's Cabinet, has urged State-owned banks to lower the interest rate for loans to small and micro-sized enterprises by 1 percentage point in the fourth quarter. Columnist Qin Shuo comments in a post:

It is good to see the central government is continuing its efforts to help private enterprises to obtain affordable financing.

Yet compared with the difficulties they face in getting loans and their tax burdens－which are now more transparent and better regulated than before thanks to the central government's endeavors－it is the variety of fees and fines collected by different departments of local governments that are the heaviest burden on enterprises.

Almost all departments of local governments related to enterprises and industries, such as the fire department, production safety, advertising, labor arbitration and environmental protection departments, have the conditions to serve as both referees and players while dealing with private enterprises. They are usually the main drafters of local laws and rules in their fields, which allows them to concoct various pretexts to collect fees or fines.

The collectors of these fees write the tickets to boost their own interests, not to defend public interests. And the enterprises have to just bite the bullet when these arbitrary fees or fines are enforced upon them.

The problem has been there for long. It is hard for the reforms designed at the top-level to find favor with grassroots power holders as they are often the coordinators of vested interest groups, and there is not yet an effective supervisory mechanism to ensure they toe the line. Thus in some places the tendency to seek interests from power remains deep rooted at the grassroots level.

However, the problem cannot be solely attributed to the greediness of the vested interests. The fees and fines, as an important source of revenue for grassroots governments, provide them with the means to fulfill their duties and provide public services, for which they have no other regular sources of income with which to fund them.