The reform of China's rural taxation system achieved remarkable success last year, but many pitfalls still lie ahead, an article in the Beijing-based Macroeconomics magazine said.

The heavy economic burden of farmers, stemmed from the irrational rural taxation system, has become a major social problem in recent years.

Under the system, farmers are subject to not only agricultural taxes but also various kinds of fees levied by local governments.

The heavy burden saps farmers' income, dents their enthusiasm to farm and impedes rural economic development, the article said.

The central government has decided to target these problems by reforming the current rural taxation system.

In April of last year, the central government chose East China's Anhui Province and nine other provinces as pilot regions to carry out the reform.

Local governments in these regions took a series of steps in the past year to cut taxes and fees on farmers, according to the article.

They called off all administrative funds previously charged on farmers, revoked the slaughter tax and moderated the agricultural tax.

The compulsory working system, which requires farmers to work for hours free of charge, was also phased out in these regions.

The reform has reduced the burden of local farmers significantly, the article reported.

In Anhui, taxes and fees on farmers dropped by 1.7 billion yuan (US$205.3 million), or 31 per cent in the past year.

Another key component of the reform was replacing various fees on farmers with taxes. The measure removed those irregular fees levied by non-tax departments.

Anhui built many taxation service houses in the countryside last year, making it convenient for farmers to pay taxes.

Before the reform program was implemented, rural officials in the province used to visit farmers to collect fees. Now they can leave everything to farmers themselves after giving them the tax bill, said the article.

The reform also promoted local administrative organs to streamline staff and improve efficiency.

Moreover, the easing of taxation and increased convenience have stimulated local farmers to concentrate on their production.

"Despite the flat grain prices last year, few farmers in our county have deserted their land because the reform benefited them," the article quoted a county official in Anhui as saying.

Some problems, however, have emerged from the new taxation system. Some burdens were lifted but new ones were added.

Although fees were calculated according to capitation, taxes are based on the amount of farmland owned.

For farmers who have large tracts of lands, the fee-turned-tax duty on them far exceeds the exempted fees, the article said.

A survey in North China's Shanxi Province shows that 18.3 per cent of local residents thought they had to pay higher taxes since the reform started. Most of them are major grain producers in the region.

Meanwhile, farmers are reluctant to manage barren areas because the government offers the same tax rate on all farmlands, despite their differences in quality.

It is likely that more and more barren land will be deserted under the one-size-fits-all tax rate, the article warned.

According to a survey of 67,000 rural households last year by the National Bureau of Statistics, farmers who cultivate large areas of land usually earn far less than those who work with rural public institutions, such as schools and hospitals, and those who migrate to cities.

However, these large-tract farmers must also shoulder the burden of agricultural taxes which are levied in proportion to the size of each household's farmland.

This practice may press farmers to desert their land, which will be detrimental to agricultural development, the article pointed out.

In addition, villages with scant farmland will see a sharp drop in their tax revenue, leading to fund shortages.

Further steps are needed to improve the reform and protect farmers' interests, the article said.

While all irregular fees have been revoked, the taxation method should be adjusted so that agricultural taxes are equally shared among all rural residents.

It is also important for local governments to adhere to the "protective" price policy in order to motivate farmers, the article stressed.

This policy requires local governments to buy grain from farmers at higher prices when the grain market slumps. It is designed to help farmers hedge market fluctuations and secure profits.

It is also recommended that rural governments speed up their urbanization process. Urbanization will help transform farmers into urban workers or business people, which will lead to an increase in both their income and local tax revenue, the article said.