Slowdown seen in fiscal revenue growth

Jan-Feb rise lowest in nearly six years

China's fiscal revenue expanded at the slowest pace in nearly six years during the first two months of 2015, official data showed on Monday, indicating that the economy still faces downward pressure.

Total fiscal revenue in China rose by 3.2 percent year-on-year to 2.6 trillion yuan ($410 billion) in the first two months of 2015, the slowest pace since April 2009, the Ministry of Finance (MOF) said in a statement posted on its website Monday.

The reading was well below the 8.6 percent increase seen in the whole of 2014, and also far less than the 2015 fiscal revenue growth target, which has been set by the MOF at 7.3 percent.

Revenue from value-added tax (VAT), one of the main tax categories in China, rose 2.2 percent year-on-year in the January-February period, down from 7.1 percent growth in the whole of 2014, the data showed.

The downward trend in VAT revenue can be partly attributed to the decline in industrial product prices, the MOF said.

According to official data, China's Producer Price Index (PPI) fell by 4.8 percent year-on-year in February, lingering in negative territory for the 36th consecutive month.

"China's cooling real estate sector and industries with overcapacity such as steel and cement have been an increasing drag on the growth of the country's fiscal revenue," Zhang Bin, director of the taxation research office under the Chinese Academy of Social Sciences (CASS), told the Global Times on Monday.

According to data from the MOF, China's real estate business tax revenue fell by 1.6 percent year-on-year in the first two months to 96.5 billion yuan.

The weak fiscal revenue data shows the economy still faces downward pressure, Zhou Hao, an economist with Australia and New Zealand Banking Group (ANZ) in Shanghai, told the Global Times on Monday.

China's GDP growth in the first quarter is likely to drop to around 7 percent from 7.3 percent in the fourth quarter of 2014, Zhou noted.

Given the slowing economy and under-performing property market, it's normal to see weaker growth in tax revenue, Yu Shuyi, a research fellow at the National Academy of Economic Strategy under the CASS, told the Global Times on Monday.

Ramped-up taxation measures such as VAT reform have also contributed to the lower growth in fiscal revenue, but reducing the tax burden on enterprises could help spur economic growth, Yu noted.

Premier Li Keqiang said at a State Council meeting in February that reducing the tax burden on enterprises will be part of China's ongoing proactive fiscal policy.

According to a report on January 29 by news portal people.cn, China's VAT reform - which aims to replace business tax with VAT - reduced the total tax burden on enterprises by over 192 billion yuan in 2014.

The MOF said that revenue from business tax rose by 4.9 percent year-on-year in the first two months. But, if the influence of the VAT reform is excluded, the rise would actually be 7.9 percent, it said.

According to data released by the MOF, China's fiscal -expenditure maintained double-digit growth during the January-February period, rising by 10.5 percent year-on-year.

However, China's fiscal deficit will not get out of control as the increase in fiscal expenditure will keep in line with the MOF's annual growth target for it of 10.6 percent, Yu said.

Also, fiscal revenue growth is expected to rebound in the coming months, with the economy set to stabilize following policy easing measures, said Zhou from ANZ.