China's tax revenue will continue to grow stably this year, but its growth rate will drop compared with that of last year, a senior tax official said in Beijing Tuesday.

Xie Xuren, director of the State Administration of Taxation, said there are a number of favourable factors which will fuel revenue growth this year.

"The country's economy will continue to grow at a fast rate, due to the central government's macro control measures," he said.

This will lay a solid foundation for this year's tax revenue growth, he told reporters at a press conference.

While existing measures to collect taxes will continue to play a role, the government will take new steps to beef up tax collection, he said.

However, Xie said there were also a number of negative factors affecting tax revenue growth.

For example, there is not a lot of room for manoeuvre when taking measures to broaden tax collection coverage, as such moves have already contributed much to tax revenue growth in recent years.

Tax revenue from the sectors which experienced over-investment such as cement and steel will reduce, due to the government's macro controls.

The relatively higher base figures last year will also create difficulties for this year's tax revenue growth.

China's tax revenue, exclusive of tariffs and agriculture tax, stood at 2.57 trillion yuan (US$309.9 billion) last year, an increase of 25.7 per cent from the previous year.

Some economists said the tax revenue growth, which was much faster than that of gross domestic product (GDP), was abnormal.

But Xie said the fast revenue growth was mainly due to the country's rapid economic growth, which stood at more than 9 per cent.

GDP could grow as much as 15 per cent when calculated based on current prices, he said. "The gap between GDP growth and tax revenue growth should lessen."

While the economy grew at a rapid pace, companies' profits also increased by a large margin, he said.

Profits made by China's industrial companies rose a year-on-year 38.8 per cent during the first 11 months of last year.

This contributed to relatively rapid growth in corporate income tax, which rose a year-on-year 33 to 34 per cent.

"Fast revenue growth last year was an indication of the country's fast economic growth and the improvement in companies' profits," he said.

According to Xie, the government will continue to carry out a trial reform of value-added tax in Northeast China's Heilongjiang, Jilin and Liaoning provinces this year.

The tax department will co-operate with the finance department to conduct an in-depth study on the scheme to prepare for introducing the reforms nationwide.

The trial began in Northeast China on July 1 last year. It allows companies in eight major industries such as equipment manufacturing and automaking to receive tax rebates when buying new machinery.

Companies in the three provinces have so far received a total rebate of 1.28 billion yuan (US$154.2 million).

Xie said the reform has helped encourage these companies upgrade facilities and adjust their product lines. "It has played an important role in increasing these companies' competitiveness."

Xie noted that the government is still considering a plan to unify the two enterprise income tax policies, aiming to end tax favors granted to foreign-funded companies.

The government is also waiting for the right time to introduce the fuel tax.

Source: China Daily