Slower tax revenue growth reported

ANN@The China Post

China saw slower year-on-year tax revenue growth in 2016, data from the nation’s tax authority showed on Thursday.

Slower growth of tax revenue points to higher short-term pressure on government spending, but the economy will benefit in the long run after tax cut policies for enterprises gradually show results, experts said.

China collected 11.59 trillion yuan ($1.67 trillion) in taxes last year, up by 4.8 percent year-on-year, but lower than the 6.6 percent growth rate in 2015, data from the State Administration of Taxation showed.

The growth rate of tax revenue was 1.9 percentage points lower than the 6.7 percent GDP growth rate, showing a wider difference compared with a year ago.

The tax revenue growth rate continued to run slower than that of GDP growth starting in 2012.

Wang Jun, director of the administration, said tax cut policies played a major role in the slowing trend of tax revenue, referring to value-added tax reform launched in 2012.

The reform aimed to replace standard business income taxes with a value-added tax.

The reform spread to the construction, real estate, finance and consumer services sectors last year.

If tax revenue continues to slow down, this would put pressure on government spending in the next year, according to Zhang Lianqi, a financial expert whom the ministry consults.

“But if taking a long-run perspective, say, three to five years, that would be a different scenario,” said Zhang.

Zhang said enterprises that benefited from the tax reform would revitalize the economy in the long run, after the nation relies less on stimulus measures.

Hu Yijian, a professor of economics at Shanghai University of Finance and Economics, said slower growth of tax revenue should not be a concern in the long run.

Hu said “slowing of tax revenue shows that progress has been made in squeezing out asset bubbles”, because a large proportion of tax revenue came from the capital market in the past several years.

Hu suggested that because a further slowing of tax revenue growth is likely, governments should cut excessive spending.

A statement released after the Central Economic Work Conference in December showed that the government put a high priority on prevention of financial risks.