State Council vows revenue reform

By Chen Dujuan Source:Global Times Published: 2013-7-3 23:33:01

A State Council executive meeting Wednesday pledged to further revitalize existing fiscal revenue and make use of idle capital, as the growth of China's fiscal revenue has slowed and some areas have even seen a drop in fiscal revenue.

The meeting, chaired by Premier Li Keqiang, vowed to focus the limited money on key sectors such as energy conservation, public services and boosting consumption, in order to promote economic upgrading.

The State Administration of Taxation (SAT) said Monday that over the first five months of 2013, North China's Inner Mongolia Autonomous Region has seen consecutive year-on-year drops in tax revenue, a major part of the local government's fiscal revenue, which the SAT attributed to a slowdown in economic growth and declines in demand for and prices of resource products.

Erdos in Inner Mongolia recorded a 15.8 percent decline year-on-year in its fiscal revenue during the same period.

These changes reflect China's overall fiscal revenue slowdown.

Combined central and local fiscal revenues from January to May increased 6.6 percent year-on-year, a reduction of 6.1 percentage points from the same period last year, and central fiscal revenue grew only 0.1 percent year-on-year for the same period, largely due to the economic slowdown and structural tax reductions, a State Council report showed on June 27.

Central fiscal revenue increased by 9.4 percent in 2012 and 20.8 percent in 2011.

Finance Minister Lou Jiwei said the central government may struggle to achieve this year's central revenue growth target at 7 percent, as industrial output slowdown and declines in company profits will set back the fiscal revenue growth rate for the next few months.

Fiscal revenue growth generally accelerates if the economy grows quickly and slows more if the economy slows, Zheng Xinye, a professor at Renmin University of China, told the Global Times Wednesday.

China's fiscal revenue increased 6.9 percent year-on-year in the first quarter while the GDP grew 7.7 percent, the first time since 1994 that fiscal revenue has grown more slowly than GDP.

Ye Qing, a professor at Wuhan-based Zhongnan University of Economics and Law, told the Global Times Wednesday that the situation in the second quarter is expected to be similar.

The country's fiscal spending, on the other hand, grew at a rapid 13.2 percent in the first five months of 2013 despite the slowing fiscal revenue, increasing pressure on governments at various levels.

"It's time for the local governments to lead a thrifty life by cutting operational expenses and reducing infrastructure projects while guaranteeing the public's livelihood," Ye said.

It is hard to increase the fiscal revenue growth rate, as doing so would place a greater tax burden on businesses, Zheng said, so the government can only reform fiscal spending by committing to zero growth in China's "three public consumptions" - government spending on official receptions, vehicles and overseas trips.

"The central government is not afraid of a slowdown in fiscal revenue. It is focused on making use of existing revenue and making structural adjustments to enhance the efficiency of public spending," Zheng noted.

The central government will implement more tax reforms to relieve the burden on small enterprises and crack down on tax evasion, according to Lou.

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