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Last updated at: (Beijing Time) Friday, January 30, 2004

Rapid growth of China's tax revenue normal

In 2003, China realized a historic breakthrough both in aggregate tax revenue and its growth: the total tax revenue exceeded two trillion yuan, an increase of 20.3 percent, more than 300 billion yuan over that of last year, according to Xie Xuren, head of the State Administration for Taxation.


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In 2003, China realized a historic breakthrough both in aggregate tax revenue and its growth: the total tax revenue exceeded two trillion yuan, an increase of 20.3 percent, more than 300 billion yuan over that of last year, according to Xie Xuren, head of the State Administration for Taxation recently.

Some media noticed that the tax revenue in 2003 saw an increase of 20 percent while the expected growth of Gross Domestic Product (GDP) was 8.5 percent. Does this indicate that the outgrowing tax revenue over the GDP growth means China's tax imposition an over-loaded burden?

The answer by Xie Xuren may be the most authoritative one: economy is the foundation of the growth of tax revenue while the growth of the tax revenue does not go necessarily parallel with the growth of GDP. The rapid growth of the tax revenue in the last year was in the normal.

Generally speaking, major factors affecting the tax revenue are: first, the economic growth, second, the tax collection level and third the environment and relevant policies for taxation. Proceeding from the basic reasons for the growth of tax revenue, the tax revenue, which maintained a relatively rapid growth in last year, was first of all the result of the rapid growth of the national economy. And in the meanwhile the tax departments strengthened the management plus the support from all strata of social life. However, the rapid growth of the nation's tax revenue is also the contribution by taxpayers, who did so in accordance with the law. This is an overall analysis.

Second, in terms of the structure of the economic growth and that of the growth of the tax revenue, economy is the foundation for tax revenue. However, its increase may not be completely coherent to that of the GDP. The nation's GDP increased by 8.5 percent last year while the tax revenue 20.3 percent, more than twice of the former. In fact, there is a difference in the composition of the gross domestic product and that of the tax revenue. No simple comparison can be made between the two. The macro judgment in normal times is based on the macro sense and the overall tax revenue, while a more accurate analysis should be made on the structure.

Even the taxes highly related to the GDP, such as value added tax and business tax, do not share the same foundation with the GDP. They are mainly the added value of industry and commerce but has not much to do with the added value in the primary industry. Meanwhile, the turnover tax is levied, enterprise income tax, individual income tax and consumption tax are also levied, which means that tax is levied again on certain components of the GDP.

Additionally, there is another important factor for the growth of tax revenue last year that is the especially rapid increase of the value-added tax and consumption tax China levied overseas linked to import. The tax levied is from the import in general. But net import and export is used when the GDP is calculated. That is to say that the net trade value with large amount of import and export may be the same as that for small dealings. Their contributions to the GDP are also the same while the difference can be seen in the tax revenue. According to present tax system and management methods, import linkage tax is levied as long as there is import and the export tax rebate is deducted from the total tax revenue. The part of export tax rebate should be deducted from the fiscal revenue according to the budgetary arrangement made by the financial departments.

The foreign trade last year is filled with big deals in importation and exportation so the net value is not likely to be very much. But in terms of tax, a great deal of import linkage tax was levied last year. And taxes related to property, such as real estate tax, land using tax etc. had not much to do with the GDP during the same period while some newly established taxes do but it depends on the accumulation of the GDP in the last period. This is the problem at the second level. In terms of the structure of taxes and the constitution of the GDP, differences do exist.

Xie Xuren held that the 35-36 percent growth of the investment in fixed assets last year accordingly helped boost real estate tax and land using tax etc. The rapid development of telecommunications helped the business tax maintain a relatively high growth rate. Additionally, individual income tax, vehicle purchase tax also kept growing fast. The production and sales of automobiles in China increased by 30-40 percent which pushed vehicle purchase tax, levied as 10 percent of the price of vehicles, up 30-40 percent to over 14 billion yuan. Therefore, from the growth rate of the economic indexes of some main taxes--and some measures taken last year to strengthen the management of taxation--as the economy constantly grows, value-added industry and commerce, foreign import, real estate businesses helped the relatively high growth rate of tax revenue.

By People's Daily Online


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