Income Tax Becomes China’s Third-Largest Tax Source in First Half After 13% Surge to USD132.7 Billion(Yicai) July 28 -- Individual income tax revenue maintained double-digit growth in the first half of the year, surpassing consumption tax revenue for the first time in four years to become China’s third-largest tax category.
China’s individual income tax revenue surged 13 percent to CNY898.2 billion (USD132.7 billion) in the six months ended June 30 from a year earlier, driven by buoyant capital markets, rising earnings for employees in prosperous sectors, and strengthened tax collection of high-income groups, Wang Shiyu, chief auditor at the State Taxation Administration, said at a press conference today.
Meanwhile, the domestic consumption tax revenue fell 3.4 percent to CNY867.3 billion in the period.
Taxes on personal capital, especially equity transfers and dividends, contributed nearly half to the robust individual income tax revenue growth, Wang noted. Individual income tax revenue generated from restricted stock transfers almost doubled in the first half from a year earlier, while that from interest, dividends, and bonuses climbed over 15 percent.
Solid performance in certain sectors boosted employees’ income and lifted the individual income tax collection. For example, individual income tax revenue from practitioners in scientific research and technical services rose 15 percent, while that from employees in non-ferrous metal smelting and rolling processing soared 41 percent, Wang noted.
Moreover, intensified individual income tax administration for high-income earners delivered incremental revenue. Tax authorities collected additional CNY34 billion (USD5 billion) in back taxes and late payment surcharges via compliance reminders in the first half.
Beyond generating fiscal revenue, the individual income tax also serves as a core tool for income redistribution. More than 200 million taxpayers filed annual individual income tax settlement declarations for last year, Wang said. Over 70 percent of them owed no additional tax. Taxpayers with annual income below CNY120,000 (USD17,730) generally paid little or no tax after claiming special deductions.
More than 60 percent of taxpayers with payable tax liabilities fell into the lowest 3 percent tax bracket, demonstrating the system’s function of supporting low-income groups while taxing higher earners, Wang added.
Editors: Tang Shihua, Futura Costaglione
