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Slowdown and tax cuts bite into China's Q1 fiscal revenue

CHINA'S fiscal revenue dropped 8.3 percent year on year in the first quarter due to the economic slowdown and the government's tax cuts for companies, the Ministry of Finance said yesterday.

Total government revenue reached 1.46 trillion yuan (US$214 billion) in the first three months of this year, the ministry said in a Website statement.

In March alone, revenue dipped 0.3 percent, compared with a 1.2-percent drop in February and a 17.1-percent tumble in January.

Of the total fiscal revenue, tax income shrank 10.3 percent year on year to 1.3 trillion yuan. Corporate income tax declined 16.7 percent year on year in the first quarter while personal income tax dipped 0.3 percent.

The stamp duty on securities trading plunged 86.2 percent year on year during the three-month period due to a weak capital market. Meanwhile, export tax rebates rose 29.7 percent from a year before to 186.1 billion yuan in the first quarter.

China has raised export tax rebates six times since August to help struggling manufacturers. The value-added tax imposed on enterprises also started to come down in January.

Tax deductions

Compared with the previous production-based VAT system, the new consumption-based VAT mechanism allows companies to use tax deductions to offset the costs of buying equipment.

However, government spending rose 34.8 percent to 1.28 trillion yuan from the year before in the first three months as the country increased efforts to boost consumption, the ministry said in yesterday's statement.

China launched a 4-trillion-yuan fiscal stimulus package last November to increase investment and boost domestic consumption as it goes all out to counter an economic slowdown and a global financial crisis.

China's economic growth slowed to 6.8 percent in the fourth quarter of last year, the slowest pace in seven years. Premier Wen Jiabao said on Saturday that the country's economy showed "better than expected positive changes in the first quarter."

China is expected to unveil first-quarter economic figures on Thursday.

Media reports said the government is considering a new stimulus package if growth fails to meet targets in the second quarter.


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