Sound fis­cal rev­enue

China Daily (Hong Kong) - - COMMENT -

CHINA’S FIS­CAL REV­ENUE GROWTH CON­TIN­UED to re­bound in July, a trend that will hope­fully be main­tained as the eco­nomic re­cov­ery be­comes more en­trenched.

The coun­try’s year-on-year fis­cal rev­enue growth wob­bled around 6 per­cent in the first five months of the year due to the eco­nomic slow­down. But in June, it re­bound by 12.1 per­cent year-on-year, a trend that con­tin­ued in July with a rise of 11 per­cent year-on-year.

The July fig­ure shows that as the econ­omy warms up, the pick-up could be sus­tained.

It also al­le­vi­ates con­cerns that the coun­try’s pol­i­cy­mak­ers might miss their yearly tar­get of 8 per­cent fis­cal rev­enue growth.

Such con­cerns were un­der­stand­able given that the slow­down in the Chi­nese econ­omy in the first half of this year and the tax re­forms aimed at help­ing small en­ter­prises sur­vive the harsh eco­nomic cli­mate have re­duced tax rev­enues.

Since the early 1990s, China’s fis­cal rev­enue growth has sel­dom fallen be­low 10 per­cent, even when the econ­omy was be­ing bat­tered by the fall­out from the global fi­nan­cial cri­sis. For ex­am­ple, in 2009, when the econ­omy was hard­est hit, its fis­cal rev­enue still in­creased by 11.7 per­cent.

The growth in fis­cal rev­enue has been much higher than the coun­try’s GDP growth in most years. In 2007, it was as high as 32.4 per­cent, com­pared with a GDP growth of 13 per­cent.

But such high growth rates are ex­cep­tional and a dif­fer­ence that wide is any­thing but healthy, as it crowds out the rev­enues of en­ter­prises and in­di­vid­u­als and there­fore af­fects con­sump­tion, ul­ti­mately jeop­ar­diz­ing the vi­tal­ity and growth po­ten­tial of the econ­omy.

It is gen­er­ally agreed that the growth rate of fis­cal rev­enue should be in line with the growth rate of GDP.

China should shake off the tra­di­tional phi­los­o­phy of the more fis­cal rev­enue the bet­ter. It should be­come more tol­er­ant of lower fis­cal rev­enue growth and cut un­nec­es­sary ad­min­is­tra­tive spend­ing to save pu­bic funds.

Mean­while, the govern­ment should re­or­ga­nize taxes. For ex­am­ple, it should in­crease the taxes on re­sources to in­crease their con­tri­bu­tion to fis­cal rev­enues and help pro­tect the en­vi­ron­ment, and fur­ther re­duce the tax bur­den on small en­ter­prises and tech­no­log­i­cal in­no­va­tion to cre­ate jobs and add to vi­tal­ity of the econ­omy.

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