BEIJING: Having completed a major overhaul of its turnover-tax systems and passed landmark legislation in 2016, Chinese authorities turned their focus on the fixes and tweaks necessary to fine tune the system. Unlike the very busy first half of 2016, the end of 2016 and beginning of 2017 saw a lot fewer major changes to the tax system, aside from a number of tweaks and improvements to the latest reforms. The final phase of value-added tax (VAT) reform has effectively been in place since May 2016, completing the biggest tax overhaul in over 20 years. This has resulted in a unified VAT system for both goods and services for the first time. Authorities have introduced reforms to the tax system amidst a complex fiscal policy environment, which have seen expenditures rise over the past year while revenues have fallen. China’s 2016 total fiscal expenditures increased by 6.8% to Rmb18.8trn in 2016, while revenues grew by 4.6% to Rmb16trn, a slight deceleration from the 8.4% growth in 2015 due to the replacement of the business tax (BT) by the VAT. Fiscal expenditures have continued to rise throughout the first half of 2017, with total expenditures growing by 15.8%.
