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China is considering making tax cuts in certain areas to stimulate its economic development, says Qiu Xiaohua, deputy director of the National Bureau of Statistics.
The tax cuts, as part of the country's proactive fiscal policy, have not played a big role in economic development in recent years compared with the issuance of treasury bonds aimed to increase expenditure, Qiu said yesterday.
"Relevant government departments would consider a tax cut in certain industries," he said.
But China will not resort to an overall tax cut to stimulate its economy, Qiu said.
Ni Hongri, a senior researcher with the Development Research Centre under the State Council, said an overall tax cut will be of little help to the country's economic development, which suffered an insufficient demand from both home and abroad, because China's tax system was still in the initial stages compared with Western countries.
"The government still plays an important role in the current economic restructuring," Ni said. "China could not expect increased investment from private sectors and individuals by merely cutting taxes."
Both Ni and Qiu agreed "a structural adjustment" should be considered to make the tax system more efficient.
They urged some taxes be reduced while others be increased.
The central government's recent decision to spread the "fees-for-tax" reform in rural areas was one of such adjustments brought about to reduce the financial burden on farmers, said Ni.
The government should also consider increasing taxes by levying a new variety of taxes such as inheritance tax and property tax, she said.
Qiu said the growth in China's tax revenue in the past four years, which stood at 20 per cent was in close relation with the higher economic growth rate.
"The average growth rate of the Chinese economy was about 7 per cent in recent years, laying a solid foundation for tax revenue growth," Qiu said.
Chinese companies continued to improve their efficiency. The profits by domestic companies grew a year-on-year 8.1 per cent last year, following the growth of 8.7 per cent the previous year.
"The growth in profits provided a reliable source for taxation."
The country's foreign trade, another important tax source, grew at a slowed pace because of the global slowdown, still it rose 7.5 per cent last year compared with the year before, Qiu said.
People's income level, especially that of urban residents, increased steadily in recent years,, helping generate more income tax.
Jin Renqing, director of the State Administration of Taxation said the country's economic growth contributed about 50 per cent to tax revenue growth last year.
(China Daily March 1, 2002)
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