China's tax revenue growth slows in H1

The Ministry of Finance (MOF) announced Monday that China's tax revenues, a major source of the government's fiscal income, grew at a slower pace in the first half of this year.

During the January-June period, the government collected tax revenue totalling 5.93 trillion yuan (961 billion U.S. dollars), up 7.9 percent year on year but slower than the 9.8-percent increase seen in the same period last year, the MOF data show.

The revenue from domestic value-added tax (VAT), a type of tax levied on the difference between a commodity's retail price and production cost, increased 6.6 percent to 1.43 trillion yuan, down 1.5 percentage points from the growth seen in the first half of 2012.

The subdued growth in VAT revenues was due to slower expansion in industrial added-value, falling prices, a persisting downturn in markets for some raw materials and energy products, as well as structural tax cuts, according to the MOF.

Consumption tax revenues increased 3.6 percent year on year to 435.35 billion yuan, 8.1 percentage points lower than the growth rate for the same period last year.

But the MOF noted fast expansion in tax revenues for turnover tax, especially in the real estate sector and the construction industry, due to warming property transactions in the first half of the year.

In the first six months, turnover tax revenues grew 12.9 percent to 884.51 billion yuan, compared with a 9.6-percent increase in the first half of 2012. Turnover tax collected from the property sector and the construction industry surged 45.7 percent and 18.0 percent year on year, respectively.

The revenue growth for corporate income tax also slowed, with the category's total tax revenues up 14.2 percent to 1.50 trillion yuan, while revenues from personal income tax broke through the decline seen in the same period last year, increasing 11 percent to 363.08 billion yuan.

The MOF has attributed the fast growth in personal income tax revenues to higher disposable personal incomes and rising transaction prices in second-hand home sales.

Fiscal revenue in China includes taxes, administrative fees and other government income, including fines and earnings from state-owned assets.

Previous MOF data show that China's fiscal revenue growth decelerated to 7.5 percent in the first half on the back of a continuous economic slowdown and the country's structural tax reforms, including a pilot program to reduce Chinese companies' tax burden by replacing the turnover tax with VAT.