The official data from the Chinese Communist Party (CCP) shows that in the first seven months of this year, national tax revenue decreased by 5.4% compared to the same period last year, while general public budget revenue decreased by 2.6%. However, the other major component of general public budget revenue – non-tax revenue – saw a surprising increase of 12%, with some local data showing a 26.5% growth in confiscation revenue. Mainland netizens pointed out that this trend is akin to “killing the chicken to get the eggs” and “making up for insufficient tax revenue with fines.”
According to a report by Jiemian News on the aforementioned data from the Ministry of Finance, this decrease in revenue is attributed to the “dual impact of slowed economic growth and tax reductions and refunds.” The data indicates that from January to July, the proportion of non-tax revenue in general public budget revenue increased by 2.4 percentage points to 18.0% from 15.6% in the same period of the previous year.
Official information states that non-tax revenue refers to government funds received by various levels of government, institutions, public entities, social groups, and organizations performing administrative functions other than tax revenue. Non-tax revenue includes government fund revenue, special revenue, administrative fees revenue, confiscation revenue, state-owned capital operation revenue, state-owned resource (asset) paid use revenue, donation revenue, government housing fund revenue, and other revenue.
According to Caitong Securities, in 2022, of the 3.7 trillion yuan of non-tax revenue nationwide, local non-tax revenue accounted for 87%. Non-tax revenue accounts for nearly 30% of local fiscal revenue, becoming an important source of local government revenue. Less developed regions show even higher dependency on non-tax revenue.
Media outlets in China pointed out that most provinces only provide vague non-tax revenue data without disclosing its detailed composition. However, the Finance Department of Heilongjiang Province revealed that of the eight non-tax revenue items in the first half of the year, confiscation revenue increased by 26.5%, mainly driven by increased penalties from disciplinary and judicial authorities.
Yan Yanming, a researcher at Zhongcheng International Research Institute, told Jiemian News that the high growth in non-tax revenue helps relieve short-term fiscal pressures on local governments. However, the major sources of non-tax revenue such as state-owned asset usage, administrative fees, and confiscation may have negative long-term impacts on the business environment and fiscal sustainability.
The continuous growth of non-tax revenue and reliance on fines have sparked online criticism, with comments such as “killing the chicken to get the eggs,” “there are ways to generate income!,” “hehe, is it stolen?,” and “making up for insufficient tax revenue with fines.”
The practice of “confiscation revenue” has long been criticized. In recent years, exorbitant fines have been imposed in many areas. For instance, an elderly person who made only 14 yuan by selling unqualified celery received fines totaling 100,000 yuan from local market supervision authorities.
Several Chinese media outlets recently reported that a company in Tangshan, Hebei Province, faced a potential confiscation of 25.58 million yuan by the Market Supervision Bureau of Chengwu County, Heze City, Shandong Province, under the guise of cracking down on online pyramid schemes. An audio recording circulating online revealed that the bureau employees, while negotiating the confiscation amount with the company, mentioned supporting one company being beyond their ability but destroying one company being too simple, and also disclosed the need to achieve 50 million yuan in “political achievements” annually. This incident has sparked widespread discussion online.
After the Third Plenum of the Chinese Communist Party (CCP), officials have introduced various fiscal and tax measures, including gradually reducing consumption taxes at the local level and integrating additional local taxes. The authorities have also confirmed that the management authority for most non-tax revenue collected by local governments will be “appropriately decentralized,” including highway tolls. Chinese netizens have expressed concerns about extensive taxation efforts and handing over fee collection powers to local governments, accusing them of “grabbing money.”