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Full Text: Report on China's central, local budgets
Posted: March-15-2009Adjust font size:

Following is an overview of budget implementation and financial work in 2008:

1. Budgetary revenue growth and use of surplus revenue

Thanks to intensified efforts in revenue collection and management by tax, customs and public finance departments in addition to economic development, overall revenue growth was fairly rapid, though growth in the second half of the year was noticeably more sluggish. Thanks to rapid economic growth and good corporate performance in the first half of the year, plus special factors such as the 2007 surge in corporate profits, increase in corporate income tax receipts and the effect of tax policy adjustments, national revenue grew by 33.3%. None of these special factors were present in the second half of the year. Due mainly to the impact of the global financial crisis, economic growth slowed and corporate profits weakened. Following a big cut in the corporate income tax rate in 2008, a series of policies to reduce or exempt taxes and fees were introduced to strengthen and improve macro-control through management of public finance and promote steady and rapid economic growth. This led to the slower growth in national revenue. National revenue grew by 5.2% in the second half of the year, while revenue collected by the central government dropped by 0.9%.

Main revenue items in the central budget. Domestic VAT reached 1.349742 trillion yuan, up 16.3% and equivalent to 100.7% of the target. Domestic sales tax reached 256.78 billion yuan, a rise of 16.4% and equivalent to 104% of the target. VAT and sales tax on imports amounted to 739.107 billion yuan, up 20.1% and equivalent to 107.8% of the target. VAT and sales tax rebates for exports totaled 586.59 billion yuan, up 4.1% and equivalent to 102% of the target, which represents a decrease in revenue by the same amount. Business tax totaled 23.21 billion yuan, an increase of 14.5% and equivalent to 103.2% of the target. Corporate income tax registered 717.34 billion yuan, a rise of 27% and equivalent to 111.6% of the target, with the high increase mainly due to the large increase in corporate income tax in 2007. Individual income tax reached 223.418 billion yuan, up 16.9% and equivalent to 110.1% of the target, with the large increase mainly due to the growth of per capita disposable income for urban residents and improved collection and management. The securities transaction stamp tax reached 94.968 billion yuan, down 51.2% and equivalent to 48.8% of the target, with the shortfall due to a large decline in revenue triggered by the sluggish stock market, the reduction of the securities transaction stamp tax rate and the scrapping of the stamp tax on stock purchases. Tariffs hit 176.995 billion yuan, an increase of 23.6% and equivalent to 110.6% of the target, mainly due to the rapid growth of general imports. Non-tax revenue hit 170.451 billion yuan, up 23.6% and equivalent to 118.4% of the target, with the high increase mainly due to the increase in fees for mineral prospecting and mining rights and resource consumption charges as well as mineral resource compensation fees following reform of the system for paid use of resources.

The use of surplus revenue. National revenue exceeded the budget target by 283.09 billion yuan, including a 108.02 billion yuan surplus in the central budget. The main reasons for the surplus are as follows: increases in real terms in economic indexes directly related to tax revenue, including the value-added of industry and commerce, total fixed asset investment, total volume of imports and exports and total retail sales of commodities, exceeded the projected figures. In addition, the increase in corporate income tax added to national revenue by a large margin due to the considerable increase in corporate profits in 2007. Surplus revenue in the central budget was used in the following areas in accordance with relevant laws and regulations as well as resolutions and decisions of the First Session of the Eleventh NPC. A total of 18.5 billion yuan was used to increase tax rebates and transfer payments to local governments. Two billion yuan was spent on education, the bulk of which went to students in the quake zone in need of special temporary assistance. Another 500 million yuan went to science and technology for independent research and development work on major scientific research equipment. Four billion yuan of surplus revenue from vehicle purchase tax receipts was transferred to the central government fund for post-earthquake recovery and reconstruction to rebuild damaged roads through expenditures from vehicle purchase tax receipts. Another 29.1 billion yuan was used to increase subsidies for agriculture, fisheries, forestry and other industries to offset the increases in the prices of refined petroleum products in June. An additional 4.7 billion yuan went to providing disaster relief, handling public emergencies and providing further relief for victims of massive natural disasters, the earthquake and the baby milk formula scandal. In response to the global financial crisis and in order to further boost domestic demand, the central government increased spending by 30 billion yuan mainly to build low-income housing and major infrastructure facilities. Finally, 19.2 billion yuan was added to the central budget stabilization fund to be incorporated into the budget in the years ahead. The State Council has reported the use of the surplus in 2008 to the Standing Committee of the Eleventh NPC.

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Source: Xinhua News AgencyEditor: Lydia
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