According to official data released by the Chinese Communist Party, the proportion of non-tax revenue in the general public budget income has increased in 13 provinces including Beijing and Tianjin. One of the reasons for the increase in non-tax revenue is the decrease in tax revenue; local governments need to expand non-tax revenue to make up for the spending gap.
According to data from the Chinese Ministry of Finance, in the first half of 2024, in the national general public budget income, tax revenue was 9,408 billion yuan, showing a year-on-year decline; while non-tax revenue was 2,183 billion yuan, showing an increase of 11.7% year-on-year.
Economic Observer Network statistics found that among the 15 provinces that have published detailed financial revenue and non-tax revenue data, only Chongqing and Shaanxi saw a decrease in the proportion of non-tax revenue in the general public budget income, while non-tax revenue as a percentage in 13 provinces including Beijing, Tianjin, Shanxi, Guizhou, Yunnan, Inner Mongolia, Gansu, Jiangxi, Shandong, Liaoning, Jilin, Hunan, and Fujian increased compared to the previous year. In the first half of 2024, Fujian’s non-tax revenue accounted for 42.3% of the total.
General public budget income is divided into tax and non-tax revenue. Common non-tax revenue includes administrative fees, government fund income, confiscated income, etc. Generally, the higher the proportion of tax revenue, the higher the quality of fiscal revenue.
According to a report from the China Chengxin International Research Institute on the financial data for the first half of the year, non-tax revenue increased by 11.7% year-on-year. Yuan Haixia, director of the China Chengxin International Research Institute, believes that the fiscal growth primarily driven by taxes is relatively weak, but local governments still face pressure on expenditures and heavy debt burdens, so the growth of non-tax revenue can provide some support to local finances.
An official from a local finance department told Economic Observer Network that the main reason for the growth of non-tax revenue is insufficient tax sources. In the current situation where existing tax revenue cannot support the expected growth in fiscal revenue, local governments have to explore the potential for increasing non-tax revenue.
The so-called “confiscated income” in non-tax revenue has always been criticized. In recent years, China has seen exorbitant fines in many places. For example, an elderly person received fines totaling 100,000 yuan from the local market regulatory department for selling non-compliant celery that only earned 14 yuan in profit.
Additionally, in the recently released decision titled “Decision of the Communist Party of China on Further Comprehensive Deepening Reform and Advancing China’s Modernization”, the CCP claimed in deepening fiscal and tax reforms to expand local tax sources and appropriately increase local tax management authority.
The decision also proposes to “standardize the management of non-tax revenue, appropriately delegate some non-tax revenue management authority downward, and differentiate management based on local conditions.”
Professor Xie Tian from the Moore School of Business at the University of South Carolina previously expressed to Epoch Times, “Local governments are now wielding the ‘ultimatum,’ they will certainly greatly impose taxes, increasing the burden on the people, just like killing the goose that lays the golden eggs. This may alleviate the government’s deficit pressure, but it adds more pressure on the people.”