The 4 Trillion Yuan Tax Exemption

In China, the growth rate of taxes has outpaced the growth rate of the real economy. Before we drive our spades into this controversial topic, let us first examine the table below.

Over the past decade, the compound annual growth rate of GDP was 15.4 percent while the compound annual growth rate for fiscal revenue and tax revenue was 19.77 and 19 percent, respectively. Some officials have attempted to correlate the growth in taxation to price factors. But they are mistaken. Excluding price factors, the faster growth in tax rates in relation to real economic growth has persisted for an extended period of time.