Slowdown seen in tax revenue growth

China suffered a slowdown in tax revenue growth in the first three quarters this year, dragged down by a slowing economy and measures to alleviate companies' tax burden, according to a report released by the Ministry of Finance Monday.

The total tax revenue nationwide reached 7.74 trillion yuan ($1.24 trillion) in the first nine months this year, up 8.6 percent year-on-year, but 18.8 percentage points lower than growth for the same period last year, the ministry said on its website.

Growth in business tax and corporate income tax fell by 11.9 and 21.1 percentage points year-on-year respectively, indicating sluggish performance for many businesses.

Revenue from individual income tax declined by 8.4 percent in the first three quarters compared with the same period of last year.

The ministry said that another major cause of slower growth in tax revenue was the reduction in the tax burden for individuals with middle and low income, as well as for small and micro-sized enterprises, export-oriented companies and businesses in rural areas.

However, Li Jianming, deputy director at the China Enterprise Confederation, told the Global Times Monday that small and medium-sized enterprises had not felt much benefit from the reduction in their tax burden.

"Generally, Chinese enterprises' tax burden is still higher than in most other countries across the globe," said Li.

China started levying a value-added tax (VAT) on certain sectors including the transportation industry in Shanghai this January to replace the existing business tax under a pilot reform program to alleviate enterprises' tax burden. The program has since expanded to several other cities.

The reform will be widened to more sectors including construction and eventually to the whole country, Vice Premier Li Keqiang was quoted as saying by Xinhua News Agency Sunday.

The slowdown in tax revenue growth has raised concerns about slower fiscal revenue growth and risks of a budgetary deficit.

In the first three quarters, total fiscal revenue nationwide rose 10.9 percent year-on-year to 9.06 trillion yuan, 18.6 percentage points lower than the growth in the same period last year, the ministry said Thursday.

"A dramatic slowdown in fiscal revenue growth will negatively impact the whole economy," Wang Surong, a taxation professor at the Beijing-based University of International Business and Economics, told the Global Times.

Wang said the authorities need to collect various taxes strictly in order to avoid tax evasion.

Wang mentioned one company, without disclosing its name, which made a supplementary payment of taxes worth 10 million yuan when it heard the local tax bureau planned to scrutinize its tax records.

The ministry also said the falling consumer price index (CPI) is partly responsible for the slowdown in tax revenue, because the figures were calculated based on current prices.

The CPI grew 1.9 percent year-on-year in September, down 2 percent compared with August and 6.1 percent compared with September last year.