Fiscal Revenue Growth Slowed in March Amid Tax Cuts
China’s March fiscal revenue expansion slowed with sharp declines in individual tax collections and land sales, signaling greater pressure on government coffers amid massive tax cuts to shore up economic growth.
Central government fiscal revenue rose 4% year-on-year in March, 4.4 percentage points lower than in the same month last year, according to data released Tuesday by the Ministry of Finance.
Government tax revenue rose 1.9% in March, down from growth of 14.3% a year ago, reflecting greater efforts to cut costs for businesses and individuals as the economy cools. Beijing promised to slash taxes and fees this year by nearly 2 trillion yuan ($297.64 billion), compared with cuts of 1.3 trillion yuan last year.
Individual tax collections recorded the biggest change after the government reformed the individual income tax regime earlier this year. Individual tax collection in March dropped 48.4% from a year ago, according to finance ministry data.
Government income from land sales also shrank further in March, dropping 9.5% from the same period last year.
For the entire first quarter, China’s central government fiscal revenue grew 6.2% year-on-year to 5.36 trillion yuan. The growth rate was more than halved from last year’s 14%.
Since the first quarter often generates the highest fiscal revenue growth of the year, the government may see slower revenue growth in following months with the unfolding effects of tax and fee cuts, said Huachuang Securities in a research note.
Li Dawei, an official at the Finance Ministry, also warned of greater pressures on fiscal revenue reflecting continued taxation reform efforts. But Li said he expects the government’s annual fiscal revenue growth to reach its 5% target set earlier this year as business improves and the economy stabilizes.
The March collection of corporate income taxes rose 57%, and sale taxes, 36.4% year-on-year. Both significantly outpaced last year’s growth. The increase of value-added tax revenue slowed 5.1 percentage points to 9.3% in March.
Value-added tax from imports dropped 0.1% in March while tariff collections declined 11.7%, reflecting sluggish imports and the effects of lower tariff policies.
In the face of slower revenue growth, Premier Li Keqiang in March called for governments at all levels to reduce their general public spending, but ensure enough spending on public welfare.
As of early April, 46 of the 102 central government departments that released 2019 budgets reduced their general public spending plans from last year’s actual outlays.
In addition to budget cuts, Beijing is also seeking larger dividends from centrally administered financial institutions to offset the revenue losses from tax and fee cuts.
China’s budget deficit this year is expected to widen to 2.76 trillion yuan, representing around 2.8% of GDP, according to this year’s government work report, which Li delivered to legislators March 5. The ratio is slightly higher than the 2.6% estimate for 2018.
Contact reporter Han Wei (firstname.lastname@example.org)
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