July 25th, 2012 | China Daily Slowing economy sharply weakens tax revenue growth
The Chinese government collected much less tax in the first half of this year as the economy expanded at its slowest pace since the depth of the global financial crisis, according to data released by the Ministry of Finance on Tuesday.
Tax revenues rose only 9.8 percent year-on-year to reach 5.49 trillion yuan ($866.76 billion) in the world’s second-largest economy during the first six months, according to the MOF.
The growth was down significantly by 19.8 percentage points than that of the same period last year.
The sharp decline in revenue growth gives the Chinese government less room to stimulate the slowing economy.
China’s economy grew 7.6 percent year-on-year in the second quarter of this year, marking the slowest expansion in three years.
The growth of all tax collected slowed drastically in the first half, with growth in value-added tax, sales tax, business tax and corporate income tax slowing 11.6 percentage points, 8.5 percentage points, 14.8 percentage points and 21 percentage points, respectively, according to the MOF.
Taxes related to the property sector, which used to contribute to the majority of local governments’ income, slumped as the government maintained its tight grip over the housing market to curb price hikes.
In the first half of the year, contract tax and business tax for the property sector fell 9.9 and 8.5 percent, tumbling 37.4 and 27.9 percentage points, respectively, from a year ago.
According to an MOF spokesman, the good news is that growth in tax revenues picked up a little bit in May and June after the central bank cut banks’ reserve requirement ratio and the benchmark interest rates to spur the economy.
In the January-June period, China’s fiscal revenues, which consist of taxes, dividends of shares controlled by the State-owned enterprises, lottery sales income and other investment income by state funds, grew 12.2 percent year-on-year to nearly 6.4 trillion yuan, which was 19 percentage points lower than that of the same period last year, according to the MOF.