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No.4, 2008 (General Serial No.28): Audit Investigation Findings on Transfer Fees for State-owned Land Use Right
2008-12-22日   Soure : :

Audit Investigation Findings on

Transfer Fees for State-owned Land Use Right

(Announced on June 4, 2008)

In accordance with the provisions of the Audit Law of the People’s Republic of China, in 2007 the National Audit Office (CNAO) conducted audit investigations on the collection, management, use of the transfer fees for state-owned-land use right (referred to hereafter as “transfer fees”) in 11 municipalities and cities of Beijing, Tianjin, Shanghai, Chongqing, Harbin, Hefei, Jinan, Changsha, Guangzhou, Nanning and Chengdu and 28 counties, cities and districts under their jurisdiction (referred to hereafter as “the 11 cities”) as well as the implementation of the related policies from 2004 to 2006 (referred to hereafter as “the three years”). The findings of audit investigation are hereby announced as follows:

1. Basic Situation

During the three years, the 11 cities allocated a total of 31,910.69 hectares of land, transferred 86,773.34 hectares of land with the aggregate amount of transfer fees of the contracts reaching 356.619 billion yuan. They collected 351.035 billion yuan of transfer fees of which 342.399 billion yuan was put in the financial accounts for management, representing 97.54% of the total. 261.869 billion yuan of net revenue of land transfers was made. Of the sum, 75.456 billion yuan was put under budgetary control, accounting for 28.82% of the total. 329.659 billion yuan of transfer fees was spent. At the end of 2006, the accumulated balance of transfer fees stood at 46.238 billion yuan.

The audit investigation findings indicate that the municipal people’s governments and relevant departments of the 11 cities carried out the state policies on land administration and control, gradually improved the management system of the land market, enhanced the supply of state-owned land use right and the management of the collection and use of transfer fees, improved the compensation and resettlement program for requisitioned land and promoted the gradual standardization of the transactions of state-owned land use right and collection and expenditure of transfer fees.

(1) The mechanism of market-based supply of land is preliminarily set up.

Firstly, the land market and relevant administrative systems were gradually set up and consummated. All the 11 cities have special agencies for land reserves and transactions and gradually set up the systems of public disclosure on information of land transfers, evaluation of land prices and collective policy-making. In some cities, operational standards for land transfers were formulated. From the year 2006, Beijing Municipality introduced one-layer administration policy and centralized supply of land in the city. In the construction of the Binhu New Area, Hefei city fostered the planning and control before the allocation of land, insisted on giving priority to developing infrastructure and social service facilities and plan house building land for residents whose houses were demolished in advance. Secondly, the ratio of market-based distribution of state-owned land use right was somewhat raised. In the 11 cities, the area of the transferred land through public bidding and auction stood respectively in the three years at 26.94%, 49.25% and 32.51% of the total land transferred. On average, the net revenue from land transfers accounted for 26% of the general budgetary revenue of the same periods.

(2) The management of the collection and use of transfer fees was gradually improved

Firstly, the transfer fees were more vigorously collected. In the three years, the timely collection of the transfer fees in the 11 cities amounted to 94.08% of the total. Some cities collected the transfer fees in arrears in previous years by land-use entities. The city of Changsha stipulated that new applications for land use of the entities which defaulted on transfer fees would not be accepted. Secondly, the financial management of transfer fees was somewhat improved. All the 11 cities set up special financial accounts for transfer fees and put the majority of transfer fees into these accounts for management. Among them, Chongqing Municipality put all the net revenue from land transfers, already handed in to the treasury, under budgetary control. Beijing and Chengdu corrected the wrong practice of collecting transfer fees by non-financial departments. Thirdly, the net revenue from land transfers was basically used for the prescribed purposes. In the three years, the 11 cities spent 201.824 billion yuan of net revenue from land transfers on urban infrastructure, drew 5.686 billion yuan as fund for agricultural land development and spent 2.85 billion yuan on social security of the farmers whose land was purchased.

(3) The fund for compensation of requisitioned land and resettlement is allocated on the whole and social security systems for the farmers whose land was requisitioned had basically been set up in most of the cities.

Firstly, the compensation for the requisitioned land and the resettlement program have somewhat improved. The governments of the 11 cities, in compliance with the unified arrangement of the state council in 2004, checked and cleared up the compensation fund for requisitioned land which had been defaulted, withheld and misappropriated in previous years. And on the basis of this, supervision and management were further stepped up and multiple ways were adopted, such as reservation of land, employment, immigration and buying shares for dividends, to resettle the farmers whose land had been requisitioned. During the audit investigation, the appropriation of fund for compensation and resettlement of 38 land requisition projects was sample checked, the checking covered 64 rural collective economic organizations and 686 farmer households whose land had been requisitioned were visited. The checked rural collective economic organizations should have been paid 2.229 billion yuan of fund for compensation and resettlement. In fact, 2.001 billion yuan was appropriated, amounting to 89.77% of the total. The farmers whose land had been requisitioned should be paid 84.3863 million yuan of compensation and at the time of the audit investigation 82.5398 million yuan were collected, representing 97.81% o the total. 89.47% of the projects of requisitioned land implemented the system of “two announcements and one registration” (announcement of the land requisition plan, announcement of plan of compensation for requisitioned land and resettlement and registration of the compensation for requisitioned land). Secondly, the 8 municipalities and cities, namely Beijing, Tianjin, Shanghai, Chongqing, Hefei, Jinan, Guangzhou and Chengdu, have basically set up the social security system for farmers whose land had been requisitioned. And on average, in the three years, 6.68% of the net revenue from land requisition was spent on social security of farmers whose land had been requisitioned in the 4 municipality and cities, namely Hefei, Chengdu, Jinan and Tianjin.

2. The Main Problems Disclosed in the Audit Investigation

The audit investigation found that problems of uncollected transfer fees, cutting and exemption and contravention of regulations in their management existed to different degrees in the 11 cities. In some regions, transfers of land for business purposes in contravention of the rules, “substituting requisition with leasing” of farmers’ collectively-owned land and defaulting on or misappropriation of compensation fund for requisitioned land occurred from time to time. These problems, on a certain extent, have a negative impaction on the sound development of the land market, security and integrality of the revenue of state-owned land assets and the preservation of the rights and interests of the farmers whose land was requisitioned.

(1) Problems in the collection, management and use of transfer fees.

Firstly, 9 municipalities and cities, namely Tianjin, Changsha, Nanning, Chengdu, Harbin, Shanghai, Hefei, Guangzhou and Jinan, deducted and exempted, in violation of the regulations or in disguise, 4.788 billion yuan of transfer fees, amounting to 2.17% of the total sum of transfer fees of 220.461 billion yuan. Of the sum, 2.534 billion yuan was deducted and exempted in disguise through refunding after collection, payment of transfer fees for the land use entities and transferring land at reduced prices, accounting for 52.9% of the total fund involved. In order to attract outside investment, a few cities transferred land for industrial use to enterprises at “zero land price”.

Secondly, delinquent transfer fees by the land-use entities of the 10 municipalities and cities, namely Tianjin, Chongqing, Nanning, Harbin, Jinan, Shanghai, Chengdu, Hefei, Changsha and Guangzhou, stood at 17.327 billion yuan. The land resources departments of some cities, in contravention of the regulations, issued certificates for the use of state-owned land to the land-use entities which had failed to hand in due transfer fees.

Thirdly, 10.868 billion yuan of transfer fees was not administrated under financial management in compliance with the regulations, accounting for 3.09% of the collected sum of transfer fees in the 11 cities. Among of which, non-financial entities such as administrative committees of development zones collected 8.634 billion yuan of transfer fees and did not hand in the fund to the national treasury for particular management according to regulations. Some local governments “exchanged land for projects” (mainly urban facilities and government office buildings completed in the previous years) and directly used transfer fees to offset 2.234 billion yuan of project.

Fourthly, 186.411 billion yuan of net revenue of land transfers was not put under budgetary control, representing 71.18% of the total net revenue from land transfers in the 11 cities.

Fifthly, 8.373 billion yuan of transfer fees was used in contravention of the regulations. Of the sum, 5.233 billion yuan was misappropriated for construction of office buildings, large halls and guest houses as well as for making up for shortfalls of fund. Another 3.14 billion yuan was lent out and used for external investment.

(2) Problems in carrying out the policy on compensation for requisitioned land and resettlement and the social security system of farmers whose land had been requisitioned.

Firstly, a few cities are in arrears with or lent out 561 million yuan of compensation fund for requisitioned land. Of the sum, 444 million yuan was defaulted and 117 million yuan lent out.

Secondly, a few cities failed to collect and misappropriated 5.117 billion yuan of fund for social security of farmers whose land had been requisitioned. By the end of 2006, 2.597 billion yuan remained uncollected and 263 million yuan of the 1.87 billion yuan lent out was not returned. And of the 650 million yuan which had been entrusted to financial agencies for investment, 550 million yuan was not recovered.

Besides, by the end of September 2007, 3 of the 11 cities had not formulated social security system for farmers whose land had been requisitioned in compliance with the relevant request of the State Council.

(3) Problems in the management of land transfers

Firstly, 689.88 hectares of land for business purposes was transferred through agreement in 130 transactions in contravention of the regulations. According to the stipulations of the Ministry of Supervision and the Ministry of Land Resources, as from July 1, 2002, all kinds of land for business purposes must be transferred through public bidding and auctions. As regards the land for business purposes for which city or county governments had proceeded with preliminary examination and approval, or signed agreements with developers, the involved land, as issues left over from history, may be transferred by agreement before August 31, 2004. After this date, however, land for business purposes shall not be transferred through agreement under the pretext of “issues left over from history”. But some cities transferred, through agreement before August 31, 2004, land for business purposes; this in fact did not fall into the category of cases of “issues left over from history”, treating the matter just as “issues left over from history”. Some cities even transferred land for business purposes through agreement after August 31, 2004, by citing the reasons of “issues left over from history”, inviting outside investment and renovation of the old urban areas, or by advancing the dates of the signature of the transfer contracts to those before August 31, 2004.

secondly, 1,541.05 hectares of farmers’ collectively-owned land was “rented rather than requisitioned” for construction of golf courses and villas. For instance, some cities rented farmers’ collectively-owned land and, in violation of the Circular of the General Office of the State Council on Suspending the Construction of New Golf Courses, started the building of a golf course after January 2004. Some land-use entities rented farmers’ collectively-owned land in the name of developing ecological agriculture and built villas for sale to the public.

(4) Problems in granting and use of loans for land reserves

Firstly, the securities for loans for land reserves are not authentic and the amounts of loans of some agencies of land reserves are too large and their capacity to repay the loans remains inadequate.

Secondly, loans for land reserves were misused for purposes other than the prescribed ones. Land reserves agencies of some cities used 14.236 billion yuan of land reserves fund, obtained mainly through loans, for investment in shareholding, lending out and construction of public works.

3. Audit Recommendations

In view of the main problems discovered in the audit investigation, the CNAO recommends: Firstly, the relevant local governments should take further measures to strengthen the management of transfer fees and land supply, implement in an all-round manner the system of public bidding and auction of land for business purposes, strictly enforce the state policies and regulations on standardizing the management of revenue and expenditure in land transfers, clear up the transfer fees in arrears, stop deducting or exempting, openly or in disguise under various reasons, transfer fees, put the total revenue and expenditure under local budgetary control, accept the supervision of the people’s congresses of the same level, seriously investigate and punish the irregularities and illegalities of the construction of golf courses and villas on farmers’ collectively-owned land which was “rented rather than requisitioned” and withholding and misappropriating transfer fees. Secondly, the financial supervisory and financial entities should enhance the management on loans for land reserves and curb loan risks. The financial supervisory departments should participate in determining the scale of the loans to the departments of land reserves and the control of the aggregate sum of loans. The financial departments should strengthen the examination of the loans to the departments of land reserves, their ability to pay back and the ability to guarantee of the guarantors, cautiously grant loans for land reserves and at the same time foster the monitoring and control of the purposes of the use of loans for land reserves. Thirdly, the related departments and local governments should attach full importance to and actively explore and further enhance social security of farmers whose land was requisitioned. The cities where a social security system for farmers whose land was requisitioned does not exist should set up such a system as soon as possible in accordance with the request of the State Council and include these farmers under the coverage of social security. The cities where such a system is set up should continue to improve the system and rationally determine the level of social security. All the cities should earnestly step up the monitoring and management of the revenue and expenditure of the fund for social security for farmers whose land was requisitioned to ensure the full appropriation and the use of the fund according to the regulations.

4. The Addressing of the Problems Found in the Audit Investigation

The relevant local governments attached great attention to the problems discovered in the audit investigation and have taken or are taking measures to rectify them. Firstly, the irregularities and illegalities have been actively addressed. By the end of January 2008, the 11 cities had recovered 6.827 billion yuan of transfer fees which had been misappropriated, lent out, refunded and uncollected, regained 293 million yuan of compensation fund for requisitioned land and fund for social security of farmers whose land was requisitioned which had been misappropriated and uncollected and returned 972 million yuan of misappropriated loans for land reserves. Some cities recovered part of land transferred in violation of the regulations. Secondly, the management of transfer fees is standardized. Some cities already put transfer fees, which was not covered by financial management in compliance with the regulations, under financial management and put the net revenue from land transfers under budgetary control. Thirdly, the systems were further improved. Most cities, in combination with the addressing of the problems, formulated and amended detailed rules of management of the revenue and expenditure of land transfers and the system of compensation and resettlement for requisitioned collectively-owned land.