(Yicai Global) Sept. 13 -- Chinese government revenue hit a yearly low in August at CNY989.4 billion (USD148.1 billion) following the country's transition from business tax to value-added tax.
China started to replace its 30-year old business tax with value-added tax from May 1. As a result, former business tax payers became VAT payers, resulting in an increase in VAT income and a fall in business tax income.
VAT revenues for August were up 49.5 percent from the same period last year, to CNY322.5 billion. VAT collected from former business tax payers was up 380 percent year-on-year to CNY115.7 billion, according to data released by the Ministry of Finance today.
In line with the government's goal of 'reducing instead of increasing' the tax burden, the combined revenue from business tax and VAT fell 17.6 percent year-on-year, the third consecutive month of falls since the tax reforms on May 1. The decrease last month widened from the 10.9 percent drop recorded for July.
Revenues of both business tax and VAT in all pilot sectors such as construction, real estate and finance fell over 20 percent in August. This is mainly a result of government policies to reduce revenue and a decline in tax collection due to certain payments having been made before the tax reform.
Given the ongoing economic downturn and the growing effect of the government's policy of reducing the tax burden, the outlook for fiscal revenue over the next several months remains pessimistic, the Ministry of Finance said.
Government spending, on the other hand, continued to grow at a double-digit rate in August, up 10.3 percent year-on-year to CNY1.42 trillion. Government expenditure between January and August was up 12.7 percent year-on-year to CNY11.61 trillion.
Interest payments on debt between January and August was up 37.2 percent year-on-year to CNY325.2 billion.