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Tax Rev Growth Continues to Slow down

Growth in China's tax revenue slowed in the third quarter, due to the central government's measures to cool down the economy.

The country's tax revenue grew a year-on-year 25.8 percent in the third quarter, slowing from the 26.9 percent growth in the second quarter, the State Administration of Taxation (SAT) said Tuesday.

The decline was more obvious in September, when the growth rate dropped to 21.4 percent.

Ni Hongri, a senior researcher with the State Council's Development Research Center, said the decline (in tax revenue) was mainly due to the impact of the government's economic cooling measures.

The government took a raft of measures since the second half of last year to try to cool the economy, by raising bank reserve requirements three times and curbing unwanted fixed asset investment projects.

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

SAT figures suggest that growth in the value-added tax collected from the steel sector, which is targeted by the government in its drive to reduce investment, slowed to 18.7 percent in the third quarter, from 27.5 percent in the second quarter and 55 percent in the first quarter.

Growth in the value-added tax from the building materials industry dropped to 24.1 percent in the third quarter, from 40.5 percent in the second quarter and 51.5 percent in the first quarter.

However, the tax revenue continued to maintain good development momentum during the first three quarters, the SAT said.

The revenue grew a year-on-year 26.3 percent to 1.93 trillion yuan (US$232 billion) during the January-September period.

Income from value-added tax, consumption tax and business tax rose a year-on-year 23.4 percent to 1.04 trillion yuan (US$125.4 billion) during the nine months, and import tariffs grew 34.4 percent to 276.9 billion yuan (US$33.4 billion).

A SAT spokesman said the sound tax revenue situation was a clear indication that the country's economy would continue to develop at a fast and stable pace.

The National Bureau of Statistics is expected to release major economic figures for the first three quarters next week. The country's gross domestic product grew a year-on-year 9.7 percent during the first half of this year.

The good economic situation laid a solid foundation for tax revenue growth, the spokesman said.

Increased efforts by tax departments to collect taxes also contributed to the revenue growth, he said.

Zhang Peisen, a senior expert with the SAT's Taxation Research Institute, said the country's tax revenue could grow more than 25 percent for the entire year.

"The economy will continue to grow at a higher rate, and consumer prices will be at a moderate level for the rest of the year," he said.

According to the Chinese Academy of Social Sciences, China's economy was expected to grow 9.4 percent this year, and the consumer price index to rise 4.0 percent.

Wang Tongsan, a senior economist with the academy, said the country's economic growth for this year should be higher than last year's 9.1 percent, as the economy has stepped into an upward development period.

"If there are no major breaking events internationally, nor severe natural disasters or other big domestic issues, the country's economy is capable of maintaining a growth rate of more than 8 percent next year, due to the country's macro-control measures," he said.

(China Daily October 13, 2004)

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