China’s fiscal pivot: tax reform in 5-year plan to protect budgets without crushing firms
Officials propose boosting direct and local levies, curbing tax breaks and tapping new sectors to shore up local revenues and fund social spending
As Beijing vows a stronger fiscal role to buttress an economy facing mounting risks, policymakers face a core dilemma in optimising China’s national development blueprint for the next half-decade: how to raise sufficient tax revenue without imposing an excessive burden on businesses.
“While strategic emerging industries and the digital economy are developing rapidly, their contribution to tax revenue remains relatively limited,” the authors said in the book, published last month.
At the same time, fiscal outlays are rising to support consumption, expand investment, stabilise employment and protect livelihoods, the authors added, underscoring the need to develop “a solid, balanced and strong national fiscal system to provide robust financial support for high-quality economic and social development”.
The new plan includes tax-policy improvements, such as boosting the role of direct and local taxes, tightening preferential tax incentives and keeping the overall macro tax burden at an appropriate level.