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SAT Holds Press Conference
Coordinated Development between Tax Revenues and Economy, Precise Policy Implementation and Optimization of Taxation and Business Environment

On the morning of February 1, the State Administration of Taxation (SAT) held a press conference and unveiled tax revenues collected by tax authorities, the implementation of tax reduction polices, the building of a green tax system and the optimization of taxation and business environment in 2017. In the year, tax authorities in China studied and implemented Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and the spirit of the 19th National Congress of the Communist Party of China, and carried out the decisions and arrangements of the CPC Central Committee and the State Council. Tax authorities collected RMB 12.6 trillion in tax revenues (after tax refund was deducted), up by 8.7% year on year, reversing the slowdowns of tax revenue growth in recent years, indicating the coordinated development of tax revenues and the economy has been markedly strengthened.

Coordinated development was achieved between tax revenues and the economy, with huge tax revenues collected

Tax authorities, adhering to the general work guideline of making progress while maintaining stability, worked to ensure tax revenues were collected according to the law, excessive taxes were not collected, tax reduction and exemption policies were implemented and tax evasion and tax fraud were cracked down in 2017, successfully achieving stable and rapid growth in tax revenues, according to Zheng Xiaoying, deputy director of the SAT Department of Revenue Planning and Accounting.

Coordinated development was achieved between tax revenues and the economy. Tax revenues collected by tax authorities went up by 8.7% or 3.9 percentage points year on year in 2017, with the tax elasticity coefficient or the ratio of tax revenue growth to GDP growth at current price nearing 0.8, which is within the reasonable range.

The tertiary industry was at the forefront for its contribution to tax revenues. In 2017, tax revenues from the tertiary industry rose by 9.9% and accounted for 56.1% in total tax revenues, 12.3 percentage points higher than the secondary industry. Tax revenues from the modern services industry sustained a good momentum for fast growth, and those from the Internet and relevant services industry, and the software and IT services industry grew by 55.1% and 36% respectively.

Tax revenues from the high-end manufacturing industry showed a strong momentum for growth. In 2017, tax revenues from high-end manufacturing such as general equipment, communication equipment and special equipment rose by 23.5%, 21.6%, and 20.9% respectively.

Various tax reduction policies helped relieve the burden on the real economy

The precise implementation of tax reduction policies is crucial to boosting the high quality development of China's economy. What was the result of implementing the tax reduction policies by tax authorities in the past year? "In 2017, tax authorities implemented the decisions and arrangements of the CPC Central Committee and the State Council in tax and burden reduction, vigorously promoting the supply-side structural reform and boosting the high-quality economic development," said Wang Shiyu, deputy director of the SAT Tax Policy and Regulation Department.

Regarding the VAT pilot program, tax authorities focused on implementing and improving the policy for fully rolling out the VAT pilot program in 2017, which contributed to a tax cut of RMB 918.6 billion, RMB 345 billion higher than in 2016. "The reasons for deeper tax cuts are as follows: since the VAT pilot program was rolled out to all sectors on May 1, 2016, there were four months of tax cuts on a carryover basis; the input tax on real estate purchased in 2016 was deducted by 60% for the year, with the remaining 40% carried over to 2017; the policy for the replacement of four-level VAT rates with three-level VAT rates came into force on July 1, 2017, contributing to a tax cut of RMB 14.7 billion from July to December; as training was intensified and taxpayers became more familiar with the policies, tax deduction rose further," said Wang Shiyu.

The tax incentive policy adopted in 2017 also has produced positive results. According to Wang Shiyu, the corporate income tax half-payment policy introduced in 2017 for small low-profit enterprises contributed to a tax cut of RMB 45.4 billion. In particular, the scope of half payment for small low-profit enterprises ranged from RMB 300,000 in annual income taxable to RMB 500,000, leading to a tax cut of RMB 12.8 billion. Enhancing the rate of pre-tax super-deduction of technology SMEs' R&D expenses, the tax policy pilot program for venture capital companies and angel investors, the policy pilot program of pre-tax deduction for commercial health insurance and some ongoing tax incentive policies contributed to a tax cut of more than RMB 20 billion in total.

The growth rate of tax income is calculated at current prices, says Shi Jian, research fellow at the SAT Taxation Science Institute. According to the data disseminated by the National Bureau of Statistics, the growth rate of tax revenues collected by tax authorities in 2017 was 3.5 percentage points lower than that of GDP at current prices, which justifies the deep tax cuts in the year. Since the Customs revenues increased by 23.3% in 2017, the total tax revenues rose by 10.7%, 0.5 percentage point lower than GDP at current prices. As a result, the macro tax burden for 2017, or the percentage of tax revenues in GDP went down by 0.07 percentage point year on year.

Green taxation to promote the construction of “Beautiful China”

Taxation plays a fundamental, supportive and guaranteed role in the national governance. When China’s economy experiences a critical transition to the high-quality development period, the tax authorities should take active measures to serve the national significant development strategy better.

Actively promoting the construction of green tax system is an important approach for tax authorities to support the high-quality economic development. The new policies on green taxation such as the official collection of environmental protection tax and ad valorem collection reform of resource tax are issued at the right time.

As Cai Zili, Director of Property and Behavior Tax Department of the SAT, introduced, the SAT has created the security system along with other related departments to guarantee the successful operation of environmental protection tax during the first tax collection period. SAT executed the Memorandum of Understanding on the Coordination Mechanism of Collection and Administration of Environmental Protection Tax with the Ministry of Environmental Protection to specify seven types of cooperation tasks. The SAT tightened the basic tax collection and administration work, designed the statement of “one primary form (declaration form) and four secondary forms (attached forms of water, gas, sound and slag) and one form of tax reduction and exemption, and prepared a set of basic information collection forms that can be completed once and for all. In this way, the tax payers’ burden involved in tax declaration can be really relieved.

“The tax authorities will work hard to boost the construction of tax information sharing platform and achieve the connection between tax and environmental protection at provincial level. When the ‘Spring Breeze Campaign for More Convenient Taxation Service’ is used as a chance, the classified mentoring is organized on a full scale to ensure tax payers can calculate and declare tax. The online and offline tax service, comparison of information and analysis of policy effects are properly handled, and all the preparations for collection of environmental protection tax are earnestly made” Cai said.

China started the ad valorem collection reform of resource tax on July 1, 2016. How about the results of this reform? As Cai stated, this reform has produced some significant results for over one year. It has enhanced the regulatory functions of resource taxes, promoted the conservation and efficient utilization of resources, and improved the development environment of resources industry. As a result, the allocation of tax revenue proves more preferential to local governments in order to build and improve the damage compensation mechanism of ecological environment in the course of resources development more rapidly. As of December 2017, the resource tax was increased in 28 provinces. Specifically, the revenue of resource tax in the main coal production area like Shanxi, Inner Mongolia and Shaanxi grew by 94%, 73% and 75% separately. The coal price rose sharply in 2017. Due to the ad valorem mechanism, the revenue of resource tax from coal industry reported RMB 66.755 billion, up 84.33% year on year.

Integrated innovation to enhance “actual contents” of business environment

Reforming the innovative system and mechanism and further improving business environment proves to be an essential basis for building modern economic system and driving high-quality economic growth and an integral part of public service by the government authorities. China’s tax system completed three-month tax survey and experiential survey at selected spots in 2017 to identify and solve some pain points, blockages and hard problems that adversely affect the reform of “delegation, regulation and service” of tax system.

“Based on the survey result, we issued Several Opinions concerning Tax system’s Deepening the Reform of Delegation, Regulation and Service and Improving Tax Environment to propose 30 measures that can promote the reform of “empowerment, administration and service” of tax system in an unified manner,” Fu Shulin, Deputy Director of the SAT’s General Office, said. The tax authorities introduced a series of tangible measures like abolishing the requirements for providing the written documents for indirectly issued invoices and promoting the use of real names by tax payers so that tax service can be completed in a far shorter time.

According the Doing Business 2018 published by the World Bank, the time taken by tax service in China was shortened by 52 hours, and China’s ranking was raised 32 places. As the special survey on the tax payers’ satisfaction organized in 2017 by the third-party organization indicated, the state and local tax authorities reported a rise of 5.49 points and 2.04 points in score respectively over the last year. This result revealed that tax payers’ satisfaction and sense of gain were further enhanced.

For tax authorities, a major measure for improving business environment is to regulate tax payers’ conducts and maintain market order featured by fair competition by introducing the “blacklist” for illegal tax practices and the joint punishment system. As Fu introduced, “the national tax authorities at all levels published 4,228 “blacklists” on tax offenses in 2017, implying an increase of about 100% year on year, and pushed the information on 64,200 tax payers that were subjected to joint punishments by several government authorities, up 153% year on year.”

Under the guidance of Xi Jinping’s new thought on socialism with Chinese characteristics for a new era, China’s tax system at all levels will deeply implement the spirit of the 19th CPC National Congress, continuously make tax administration and service more efficient, deepen the reform of “delegation, regulation and service” in tax system, focus efforts on optimizing business environment, and take well-targeted measures to assist the high-quality economic development in 2018.

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