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Tax revenue up by 21.9 percent

By Song Quan (China Daily)
Updated: 2008-01-06 09:28

China's financial strength maintained robust growth last year as tax revenue surged 21.9 percent on a year-on-year basis.

The State Administration of Taxation (SAT) said on Friday that the country collected tax revenue of 3.76 trillion yuan ($482 billion) in 2006. That was equivalent to roughly 18 percent of the gross domestic product (GDP).

China's taxes have been growing at an average annual rate of 20 percent for more than a decade. In 2005, they increased by 20 percent.

SAT Director Xie Xuren said the increased revenue was achieved on the back of rapid economic growth.

In 2006, soaring investment growth, which stimulated economic activity, and improved corporate profitability were the major forces driving rapid tax growth.

Annual figures for the major economic indicators remain unknown at present. But statistics for the first three quarters or for the first 11 months already indicate the trend.

China's GDP grew by 10.7 percent during the first three quarters of 2006.

Urban-area investment grew 26.6 percent in the January-November period. Profits earned by industrial enterprises expanded by a staggering 30.7 percent during the same period, a rate that was 10.1 percentage points higher than in 2005.

Xie said the major sectors that contributed to tax growth were electronics, non-ferrous metals, and the electricity, oil and machinery industries.

The industries that bore the brunt of the government's cooling-down measures such as coal, construction materials and real estate contributed less to tax revenue than they did in previous years, Xie said.

While general tax was stable, the growth of personal income tax slowed in 2006 due to a raised threshold for paying the tax.

The threshold was raised from the original 800 yuan ($103) to 1,600 yuan ($205) from the beginning of 2006.

As a result, the payment of personal income tax dropped from over 20 percent in recent years to 17.1 percent in 2006.

But that did not dent the overall tax growth rate because personal income tax accounted for a small proportion of total tax revenue. In 2006, personal income tax amounted to 245 billion yuan ($30 billion), which represented a mere 6.5 percent of total revenue.

The rapid growth of tax in the corporate sector easily offset declining growth in personal tax.