ECONOMY

China Drafts Law to Merge Local Levies Into Single Surtax

Published: Aug. 31, 2026 5:57 p.m. GMT+8

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China has unveiled a draft law to merge three existing local levies into a unified surtax, a move designed to stabilize strained regional finances by granting provincial governments more autonomy.

Released Friday by the Ministry of Finance and the State Taxation Administration for public comment, the proposed Local Surtax Law combines the urban maintenance and construction tax, the education surcharge and the local education surcharge.

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China's draft Local Surtax Law merges urban maintenance and construction tax, education surcharge, and local education surcharge.
National rate band set at 11%-13%; provincial governments finalize rates; 2025 combined revenue was 913.4 billion yuan ($128 billion).
Consolidated surtax becomes largest local-only tax revenue source, offering flexible general-purpose funds; State Council can grant exemptions.

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What Happened When

Not specified (article states 'Released Friday' but no exact calendar date)：: China's Ministry of Finance and State Taxation Administration released the draft Local Surtax Law for public comment, proposing to merge three local levies into a unified surtax.

2025：: The three existing levies (urban maintenance and construction tax, education surcharge, and local education surcharge) generated a combined 913.4 billion yuan ($128 billion), which would become the largest single source of tax revenue for local governments if consolidated.

Not specified (future condition - 'Once consolidated')：: The new surtax would become effective, shifting from earmarked funds to providing local governments with more flexible, general-purpose capital, with rates set between 11% and 13% by provincial governments.

Not specified (ongoing framework)：: The surtax would be levied on individuals and entities based on actual value-added and consumption tax payments, with the State Council retaining power to reduce or exempt it for specific industries, demographic groups, or during major emergencies.

Not specified (future/ongoing)：: Final tax rates are to be finalized by provincial governments based on local economic conditions, under the nationwide 11%–13% rate band.

AI generated, for reference only