Q: China's tax revenue grows more than 20 percent
annually, and has become an important source for China to
accumulate wealth and increase national strength. Since reform and
opening up, what reforms have been conducted on the taxation
system? What are ideas for future reform?
A: Just as you say, in recent years, China's tax revenue has
grown more than 20 percent annually. It soared from 1.7 trillion
yuan (US$205.56 billion) in 2002 to 2.05 trillion yuan (US$247.88
billion) in 2003 and 2.57 trillion yuan (US$310.76 billion) in
2004. Tax revenue has made great contributions to guaranteeing the
steady growth of China's fiscal revenue and strengthening the
country's ability to macro-control.
Since reform and opening up, accompanying the progress of
China's economic reform, its taxation system has seen two major
changes. From 1978 to 1991, China started by setting up a
foreign-related taxation system, further promoting the all-around
reform of the tax system for state-owned enterprises, centered on
"replacing profit delivery by taxes," and an industrial and
commercial tax system. In 1994, to adapt to the requirements of
establishing a market economy, China conducted a large-scale tax
reform, with the widest scope and most profound content,
implementing a system with standard value-added tax as the main
component, and consumption tax and business tax coexisting along
with the domestic-foreign unified turnover tax, enterprise income
tax and personal income tax. Resource tax and other items of
taxation were also significantly adjusted.
The successful administration of the new taxation system played
an important part in stabilizing economic development and
maintaining the steady growth of fiscal revenue. A beneficial cycle
of tax revenue growth and economic growth was in essence realized.
In 2003, the newly added tax revenue exceeded 300 billion yuan
(US$36.28 billion) and total revenue surpassed 2 trillion yuan
(US$241.84 billion), both historical highs.
China's tax revenue grows much faster than its GDP, but not
because the government has adopted a tax increase policy. In recent
years, apart from the newly imposed interest tax, the government
hasn't introduced new categories of taxes, nor has it increased tax
rates substantially. The high increase of tax revenue has been
realized without changing the taxation system, categories of taxes
or the tax rate.
A new round of tax reform began in 2004. The main idea of the
reform is to, while maintaining fast and stable growth of tax
revenue, steadily restructuring the present taxation system step by
step, to adapt to the economic situation and the need of state
macro-control. The reform will be carried out in conformity to the
principle of “simple taxation system, relaxed tax base, low tax
rate and strict collection and management,” with an aim of unifying
tax law, evening the tax burden, standardizing government
distribution, promoting the coordinated growth of tax revenue and
economy, and raising the efficiency of tax collection and
management.
The reform will start with the reform of value-added tax,
enterprise income tax and personal income tax. Reform of
consumption tax and property tax will begin at an appropriate time.
The proposed replacement of road maintenance fees by the fuel oil
tax, an element of tax reform, has entered the stage of examination
and approval. Once the oil price is suitable, fuel tax will be
levied. In addition, China will conduct a trial reform of rural tax
all over the country. All taxes on special agricultural products,
except for tobacco, will be eliminated. Agricultural tax rates will
be gradually reduced and tax items that farmers shouldn't have to
bear will be eliminated, creating conditions to realize unity
between urban and rural tax systems.
Currently, China's economy has stepped into a new phase of
growth. Economic development is featuring rapid growth with good
results. These positive factors have created the appropriate
conditions for the next round of tax reform.
Nanjing residents have their receipts
authenticated at a local tax bureau.
