In vitalizing economy, China balances fiscal revenue, tax cuts

BEIJING, Jan. 27 (Xinhua) -- China has reduced tax and fees to vitalize its market entities, and in turn, a vigorous economy constituted by numerous market entities helps increase fiscal revenue steadily, new data showed.

The country's total tax and fee cuts amounted to about 1.1 trillion yuan (about 173.6 billion U.S. dollars) in 2021 amid efforts to spur market vitality, while its fiscal revenue rose 10.7 percent year on year to hit 20.25 trillion yuan.

Scrapping the tax burden on market entities has become a national policy for sustaining economic growth amid domestic and external uncertainties. Instead of employing a massive "flood-like" stimulus, the policy emphasizes precise fiscal incentives and helps market entities receive nourishment from much-needed capital, an approach often likened by Chinese policymakers to fish benefitting from more water.

China now has over 150 million market entities, which are not only the major source of tax revenue, but key actors shaping the economic landscape. Micro, small and medium-sized businesses, for instance, create 85 percent of urban jobs in China.

Thanks to the intensified implementation of preferential measures, China's newly added tax and fee cuts exceeded 8.6 trillion yuan between 2016 and 2021, and the macro tax burden ratio dropped from 18.7 percent in 2012 to 15.2 percent last year, official data shows.

With market vitality being boosted, the country has formed a mutually beneficial balance between fiscal revenue growth and tax cuts.

China saw 13.26 million firms newly established and engaging in tax-related activities in 2021, up 15.9 percent from a year earlier, while the growth rate in the recent two years averaged 12.9 percent. They were major contributors to fiscal revenue growth.

Last year's notable increase in fiscal revenue, nevertheless, has sparked concern over whether it signifies pressure on market entities. Responding to this, vice minister of finance Xu Hongcai said that the 2021 fiscal surplus was grounded in China's continued economic recovery, where the GDP growth laid a solid foundation for the fiscal revenue expansion.

The fiscal surplus came after the country's strengthened efforts in tax and fee cuts, Xu stressed, adding that it was hence in line with the overall economic performance and growing corporate profits.

"Influenced by the steady economic recovery and rising commodity prices, the Chinese companies, particularly upper-stream ones, saw notable growth in revenue and profits, and thereby brought about the increase in fiscal revenue," Xu said.

The revenue growth was not attained at the expense of expenditure, as the Chinese government, pursuing proactive fiscal policies, ensured more money was spent on the development of key sectors. In 2021, the public budget expenditure on education, sci-tech development and social security expanded by 3.5 percent, 7.2 percent and 3.4 percent, respectively, all above the general growth rate.

On future moves in 2022, Xu said that the country, while unveiling tax- and fee-cutting measures that will be "more precise and sustainable," will extend the tax and fee cuts due at the end of 2021 for small, micro and individual businesses to further ease their operating pressure.

The central government will step up transfer payments to local governments, especially in poor and underdeveloped regions, to ensure they have sufficient fiscal capacity for local tax and fee cuts in the future, and to provide better public services, Xu said.

The country will also maximize the use of local government bonds to shore up the construction of major projects. It will set an appropriate quota for new local bond issuance to prevent debt risks, and concentrate the bonds on supporting the follow-up financing for key projects that are under construction, instead of extensive, aimless issuance, Xu added.