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China Daily Website

Germany an example for China's fiscal reform: study

Updated: 2013-03-22 21:07
By Zheng Yangpeng (

China could learn from Germany for its fiscal and tax reform, a study by a Chinese think tank and a German consultancy company.

The study, launched by the Center for China in the World Economy, Tsinghua University and Germany-based Roland Berger Strategy Consultants, said China could learn from Germany's tax system, which emphasizes both direct taxes and indirect taxes.

In Germany's 2011 tax revenue, direct taxes — including income taxes and property taxes — accounted for 40 percent of the total revenue, and indirect taxes, mainly value-added taxes accounted for 60 percent.

This is different from China's tax revenue, which is mainly made up of indirect taxes.

"A larger share of direct tax is needed in China's tax revenue because it will play a larger role in redistribution of people's income. But a reasonable indirect tax should also be pursued because indirect tax is less volatile to the economy's fluctuation," Li Daokui, director of the CCWE said.

Energy and resources tax — the third largest tax in Germany — contributed 8 percent to the tax revenue. However, in China the resources tax has a minimal impact on the total tax revenue, the report noted.

Germany's emphasis on the real economy, a housing market encouraging rentals, and a cautious approach to currency internationalization were also highlighted in the report.