China solicits public opinion on draft local surtax law

China's Ministry of Finance and State Taxation Administration on Friday released a draft local surtax law for public opinion, proposing a tax rate range of 11 percent to 13 percent while keeping the overall tax burden stable.

Under the draft law, three existing tax sources — the urban maintenance and construction tax, education surcharge and local education surcharge will be merged. Taxpayers are entities and individuals paying domestic value-added tax (VAT) and consumption tax, with tax base derived from the two levies.

Import-related VAT and consumption tax are excluded from calculation.

A floating tax rate of 11-13 percent is proposed. Provincial governments may select specific rates within this band, subject to review by provincial-level people's congress standing committees and central filing procedures. The reform maintains overall tax burden while granting provincial-level regions greater fiscal autonomy.

Luo Zhiheng, chief economist at Yuekai Securities, noted the overhaul simplifies tax collection and formalizes two former administrative surcharges into statutory tax provisions. Estimated annual revenue under the draft ranges from roughly 943.8 billion yuan at 11 percent to 1.12 trillion yuan at 13 percent. The State Council may grant tax reductions or exemptions for special industries, vulnerable groups and emergency responses.