China saw notable tax reductions in the third quarter as proactive fiscal policies took effect, strengthening corporations’ investment confidence and domestic consumption, experts say.
In the July-September period, the government’s tax income increased 8 percent year-on-year, down sharply from the 13.1 percent and 17.8 percent growth reported in the first and second quarters respectively, as a result of the tax cuts issued this year, the State Taxation Administration said on Oct 19.
The administration’s data show that in the first three quarters, total tax income reached 11.23 trillion yuan ($1.62 trillion; 1.4 trillion euros; ￡1.24 trillion), representing year-on-year growth of 13.2 percent.
Taxes from internet service companies increased at the fastest pace, with 33.3 percent growth in the first three quarters, followed by the software and information technology service sector.
Zheng Xiaoying, deputy head of the administration’s Revenue Planning and Accounting Department, says: “The slowing of tax growth was mainly because of the policies released earlier, especially since the value added tax reduction starting from May 1.”
She says VAT reform cut about 238.6 billion yuan in tax revenue.
“The reform has boosted enterprises’ enthusiasm for increasing investment, especially in the manufacturing sector,” says Lin Feng, deputy head of the administration’s Goods and Services Department.
In addition, the country’s export tax rebates, a measure implemented to cut export companies’ costs, hit 1.13 trillion yuan at the end of September, according to government data.
According to officials from the Ministry of Finance, a draft of the special deduction plan for personal income tax will be released soon.
The new rules are set to take effect starting on Jan 1 and aim to further boost domestic consumption.
The minimum threshold for personal income tax rose from 3,500 yuan to 5,000 yuan per month, or 60,000 yuan per year, on Oct 1. Under the new model, those with monthly salaries ranging from 5,000 to 20,000 yuan saw their tax bill drop by more than 50 percent. Those with monthly salaries ranging from 20,000 to 80,000 yuan pay 10 to 50 percent less than before.
Income tax is the third-largest contributor to China’s total tax revenue, following VAT and business tax.
Last year, China collected 1.2 trillion yuan in income tax, accounting for 8.3 percent of the country’s total tax revenue.
Xinhua News Agency contributed to this story.
(China Daily European Weekly 10/26/2018 page26)