China's VAT Rebate Reform Aims to Boost Local Government Fiscal Strength

(Beijing) — China's central government will give fixed rebates on value-added taxes (VATs) to local governments beginning this year — a bid to beef up the local governments' fiscal strength while tightening rules to hold them responsible for debt obligations amid slowing growth.

Previously, the central government handed 30% of annual increases in revenues from VATs back to local authorities, which critics say has failed to narrow regional income gaps because more-developed regions usually had faster VAT growth and therefore enjoyed larger rebates.