China's Tax Collection Slows, Up Only 10%

by Mary Swire, Tax-News.com, Hong Kong

16 August 2002

Although China'a tax authorities have been conducting a high-profile campaign against tax dodgers, particularly targetting wealthy and prominent individuals as well as foreign companies, tax revenue growth was 'only' 10.8% in the first seven months of the year, with 996.5 billion yuan (about US$130bn) collected. Last year tax revenue rose by 19.7% (eat your heart out, Mr Schroeder!).

The Beijing Economic Daily, which reported the figure, said the slowdown was due to a variety of policy changes, but added: "A slowdown in central government revenue growth has become a problem that cannot be overlooked."

Reductions in import and export tariffs to comply with WTO rules are no doubt a major factor; import tariffs have fallen on average by a quarter from 15.3% to 12%. The rates of corporate tax have been cut, and stamp duty receipts have fallen due to sluggish domestic stock markets.

Tax collection is however still no more than 14% of GDP, a very low figure by world standards, while government expenditure is racing ahead, up 31% on last year in the first five months, leading to worries about the size of China's deficit this year, already projected to rise 19% over last year to a record 309.8 billion yuan.

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