Sharp Slowdown in Fiscal Revenue
China's fiscal revenue growth slowed down sharply in the first seven months of 2012, but local tax authorities should avoid imposing excessive taxes in the rest of the year, Finance Minister Xie Xuren said Wednesday.
The country's fiscal revenue grew by 11.6 percent from January to July, compared to 30.5 percent in the same period a year ago, mainly dragged down by slowing growth in tax income, Xie said in a report to the Standing Committee of the National People's Congress.
Xie attributed the slower growth of tax income to the country's economic slowdown, dwindling corporate profits, easing inflation and structural tax cuts.
Some county-level governments are facing financial challenges in terms of revenue shortages, he said.
Nie Riming, a researcher at the Shanghai Institute of Finance and Law, told the Global Times that growth of tax income had decelerated mainly because of the country's economic slowdown, as turnover tax, which is closely related to economic activity, accounts for 60-70 percent of China's total tax income.
"In order to achieve the full-year target, some local authorities might increase their efforts to collect taxes in the rest of the year," Nie said. "But actually some have already increased their non-tax income sources."
In July, China's non-tax fiscal income rose by 34.7 percent year-on-year, according to data from the Ministry of Finance.
Xie said local tax authorities should not impose excessive taxes, and they are also not allowed to exempt, cut or delay levying taxes for investment projects without authorization.
"The central government is facing a dilemma: Collecting more taxes will add pressure to cash-strapped enterprises and might lead to some shutting down; but cutting taxes will result in a decrease in fiscal income," Nie said.
China will continue to expand the reform of replacing business tax with value-added tax, as part of the country's efforts to reduce enterprises' tax burdens, Xie said.
But Nie had doubts about the efficacy of the plan. "The reform only helps small enterprises with annual revenue of less than 5 million yuan ($787,000) to reduce their tax burden. Bigger enterprises do not benefit so much," Nie said.
(Reporter: Chen Yang | Global Times | 2012-8-30)
