China Experiences Slowdown in Tax Revenue Growth

November 9, 2012 Posted by China Briefing Reading Time: 3 minutes

Nov. 9 – China suffered a slowdown in tax revenue growth in the first three quarters of 2012, according to a recent statement released by the Ministry of Finance (MOF) on October 22. Detailed information of the statement can be found below.

Tax revenue in the first three quarters

In the first three quarters, China’s national tax revenue reached RMB7.74 trillion, a 7.8 percent year-on-year increase.

Main patterns of tax revenue growth in the first three quarters

Tax revenue growth slowed sharply in the first three quarters, posting an 18.8 percent decrease compare with the same period last year.
Revenue growth of major taxes related to production and operation activities slowed generally

In the first three quarters, growth in value-added tax (VAT), domestic consumption tax, business tax and corporate income tax dropped by 12.9 percentage points, 6.9 percentage points, 11.9 percentage points and 21.1 percentage points year-on-year, respectively.

Personal income tax (PIT) registered a relatively sharp decline

In the first three quarters, PIT experienced an 8.4 percent year-on-year decline, 42.8 percentage points lower than the growth rate over the same period last year. Among which, wage and salary income tax and production and operation income tax of individual businesses witnessed 13.1 percent and 16.1 percent year-on-year decrease, respectively.

Tax revenue growth relating to the real estate market slowed significantly

In the first three quarters, deed tax and real estate business tax registered a 3.6 percent and 0.2 percent year-on-year decline, respectively, with the growth rates thereof dropping by 28.6 percentage points and 20.3 percentage points compared with the same period last year.

Growth of import tax revenue slowed significantly

In the first three quarters, growth in VAT and tariffs of imported goods fell by 29.9 percentage points and 23.7 percentages points year-on-year separately.

Reasons for tax revenue growth slowdown in the first three quarters

Slowdown in domestic economic growth

The added-value of industrial enterprises above a certain scale increased 10.1 percent in the first eight months, 4.1 percentage points lower than the growth rate over the same period last year
Total retail sales grew by 14.1 percent in the first eight months, 2.8 percentage points lower than the growth rate over the same period last year
Profits realized by industrial enterprises above a certain scale fell 3.1 percent – 31.1 percentage points lower than the growth rate over the same period last year

Slowdown in general price growth

The consumer price index experienced a 2.9 percent year-on-year increase in the first eight months, 2.7 percentage points lower than the growth rate over the same period last year
The producer price index witnessed a 1.3 percent decline in the first eight months, 8.4 percentage points lower than the growth rate over the same period last year

Slowdown in the sales revenue growth of the real estate market

From January to August, sales revenue growth of commercial houses dropped by 23.7 percentage points compared with the same period last year, with the revenue generated by taxes related to real estate decreasing dramatically.

Slowdown in the import value growth of general trade

In the first nine months, the import value of general trade posted 3.6 percent year-on-year growth, 29.7 percentage points lower than the growth rate over the same period last year.

Besides the reasons mentioned above, reduction in the tax burdens for individuals with middle and low incomes, as well as for small and micro-sized enterprises, export-oriented companies, and businesses in rural areas also contributed to the slowdown in the tax revenue growth of the country.

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