China’s taxation performance has jumped by nine rankings after two consecutive climbs, which came alongside a growing recognition of its business environment, according to a latest report released by the World Bank.
In the report released on October 24, the World Bank said that one of the major drivers behind the successful performance of China’s taxation is its reform to tax and fee cuts.
China’s slashing of taxes and fees has made a splash among businesses and individuals. In the past three quarters, the world’s most populous country saved each individual an average of 1,764 yuan, or 250 U.S. dollars. Add to that, another 183 billion yuan (approx. 26 billion U.S. dollars) for small and micro enterprises, and 1.7 trillion yuan (approx. 241.5 billion U.S. dollars) in total tax cuts, according to China’s national taxation administration.
“The implementation of a larger scale of tax and fee cuts has shown a significant effect on reducing tax revenue. In the first three quarters, the tax revenue collected by tax authorities nationwide (after deducting export tax rebates) reached 11.2658 trillion yuan (approx. 1.58 trillion U.S. dollars), up 0.3 percent year on year, with the increment going down by 12.9 percentage points from the same period of last year,” Cai Zili, Executive Deputy Director of Tax Reductions Office and Director of Department of Revenue Planning and Accounting with the State Taxation Administration, told a press conference in Beijing on Wednesday.
“Cut taxes and administrative fees” was listed among China’s Top 10 economic buzzwords in 2018, a core part of China’s commitment to its tax reform over the years.
China began a massive overhaul of its tax system in 2012 by introducing the business tax (BT) to value added tax (VAT) initiative. As of May 2016, the VAT has taken over almost all of the BT’s various functions, and is now effectively China’s only form of consumption tax.
A national taxation administration spokesperson said at Wednesday’s press conference that the ensuing reform to resource taxes, environmental taxes and individual income tax has been a substantial contributor to economic growth.
“The implementation of tax reform policies over recent years has resulted in a green tax system with an improved structure, lower tax burdens, and a higher-quality economy,” said Fu Shulin, spokesman of the State Taxation Administration.
That also echoes the tax structural issue facing the leadership of the Communist Party of China, some of whom are gathering in Beijing this week to create a clearer vision for the country’s future development. A more efficient financial expenditure and further optimising the tax structure are high on the agenda.
Seeking international cooperation is widely believed to be China’s way-out for its many pressing economic issues, including tax reform.
“Chinese tax authorities have promoted the establishment of a mechanism for cooperation in tax collection and administration with other countries on the routes of the ‘Belt & Road’.
In safeguarding the interests of developing countries, we have made a series of proposals which have been adopted by international organisations, and which have been reflected in the relevant systems of law and regulations,” added Fu.
He also said China’s performance in tax reform and cooperation with other taxation communities have undoubtedly led it to have an upper say on the international stage.