Tax revenue doubles over five years

BEIJING - China's tax revenues jumped to 7.74 trillion yuan ($1.17 trillion) in 2010, double that of five years ago, the State Administration of Taxation said on Sunday.

In 2006, tax revenue was 3.76 trillion yuan. That figure climbed to 5.42 trillion in 2008 and 6.31 trillion in 2009.

Last year's record tax income included 732.8 billion yuan of tax refunds, but excluded tariffs, and taxes on tonnage, farmland occupation and deeds, the tax bureau said.

"It's time to change the fiscal mechanism," said Li Yang, deputy head of the Chinese Academy of Social Sciences (CASS), an economist close to the drafting of the 12th Five-Year Plan (2011-2015), the nation's development strategy for the next five years. "The existing framework is not in line with rapid economic growth and new, emerging problems."

The readjustment is expected to include taxes on property resources, among others.

Earlier reports said that the central government will levy property tax on luxury housing in the cities of Chongqing and Shanghai, and will collect a resource tax nationwide this year to increase income and reduce debt for local governments.

For many years, local finance has been over-dependent on land sales that are believed to be behind soaring home prices.

Moreover, China has reportedly drawn up a framework for personal income tax reform by raising the taxable threshold to narrow the gap between rich and poor.

In addition, policymakers might replace business tax with value-added tax, from which relevant companies would benefit through increased tax deductions.

Liu Zuo, director of the Taxation Science Research Institute affiliated to the State Administration of Taxation, said that the proportion of direct taxes such as income tax and real-estate-related tax would rise gradually, but the principal level of indirect duties such as value-added tax would not change during the next five years.

Last month, the Finance Minister Xie Xuren said at the national fiscal work conference that funds will also need to be earmarked for the taxation reforms in key sectors such as education, health and social security to improve the livelihood of the public.

"Another problem which needs to be addressed is to include the government's non-tax revenue in budget management," said Liu.

The move would make the use of government income more transparent, analysts said.

"The use of non-tax income must be considered and coordinated together with tax revenue," Liu said.

In 2009, the fiscal revenue of the government accounted for 32.2 percent of GDP.

China Daily

(China Daily 01/11/2011 page14)