BEIJING: The Ministry of Finance (MOF) has announced that China’s total tax revenue increased by a reduced rate in 2016, largely due to the country’s slower economic growth rate and the expansion of value-added tax (VAT) during the year. Total tax collections increased by 4.5 percent to almost RMB16 trillion (USD2.3 trillion), but that was much lower than the 8.4 percent and 8.6 percent increases seen in 2015 and 2014, respectively. The MOF pointed out that tax revenues last year were influenced by the completion of the switch from business tax to VAT in China’s services sectors. While business tax collected fell by 40.4 percent to RMB1.15 trillion in 2016, VAT revenues rose by 30.9 percent year to RMB4.07 trillion.
China’s VAT pilot scheme was extended on May 1 last year to the final sectors: the construction, real estate, finance, and life services sectors. The Government had previously indicated that completion of the switch to VAT in 2016 would reduce tax payments by services companies by some RMB500bn. With regard to other revenues, corporate tax and personal income tax receipts rose by 6.3 percent and 17.1 percent, respectively. On the other hand, collections of consumption tax fell by 3.1 percent, mainly due to a fall in receipts from tobacco and refined oil products.
