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Tax Revenue to Keep Fast, Healthy Growth

China's tax revenue surged 27.1 percent year-on-year during the January-October period, and analysts expect strong growth to continue next year.


Ni Hongri, a senior researcher with the State Council Development Research Center, said tax revenue should continue to rise rapidly since it is largely determined by stable economic growth and consumer prices.


In the first nine months of this year, GDP advanced 9.5 percent while the CPI rose 4.1 percent. Tax revenue jumped 26.3 percent in the period.


"The Chinese economy is expected to grow between 8.5 and 9.2 percent, and the consumer price index to grow less than 5 percent next year," Ni stated. "The country's tax revenue is likely to rise about 20 percent next year."


Ni also noted that the government is taking steps to improve tax collection, which will also help to pull tax revenue up.


Senior economist Gao Peiyong, of the Chinese Academy of Social Sciences, agreed that tax revenue will continue to rise strongly, but also noted that factors such as tax reform will put downward pressure on the final figure.


Premier Wen Jiabao said in March this year that the government would cancel the agriculture tax within three to five years.


"The government is likely to speed up that process next year," Gao said.


There are also plans to expand trial reform of the value-added tax system next year. Currently, companies operating in the old industrial bases of northeast China can claim tax deductions when buying new plant and equipment, an innovation that is likely to spread elsewhere in the coming year.


Zhang Peisen, a senior researcher with the Taxation Research Institute of the State Administration of Taxation, said the macroeconomic cooling-off measures the government implemented this year would also work to slow the rise in tax revenue.


"The measures have had a great impact on fixed asset investment and industrial output, which have a close relationship with tax revenue growth," Zhang said.


Growth in tax revenue slowed to 25.8 percent year-on-year in the third quarter this year, down from 26.9 percent in the second quarter.


Zhang stated that the healthier economy would continue to fuel growth of at least 25 percent in tax revenue next year.


(China Daily December 21, 2004)

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