Tax revenue posts 30% rise
Source: Bloomberg News |
July 20, 2011, Wednesday
|
Print Edition
Print Edition
CHINA'S tax revenue rose 29.6 percent to 5 trillion yuan (US$773 billion) in the first half of this year, giving officials more room to maneuver as they grapple with swelling local-government debt.
The gain, reported by the Ministry of Finance on its website yesterday, compared with a 32.4 percent increase in the first quarter from a year earlier.
"Stable" economic growth and rising company profits helped to bolster revenue, with inflation also playing a role, the ministry said. The fiscal strength that encouraged Standard & Poor's to raise China's debt rating in December may help the nation to absorb any fallout from banks' loans going bad after stimulus spending that began in 2008.
"Strong tax revenue should strengthen the fiscal position," said Chang Jian, an economist at Barclays Capital in Hong Kong who formerly worked for the Hong Kong Monetary Authority and the World Bank. "There should be little worry about tax and fiscal revenue growth as the economy keeps growing at 8 to 9 percent."
The economy increased a more-than-forecast 9.5 percent in the second quarter from a year earlier. The nation's first audit of local government debt found liabilities of 10.7 trillion yuan at the end of last year after investment vehicles were used as channels for stimulus spending.
While a "sizable bailout" will be required, China's "local debt problem does not have to trigger a banking crisis or a macro-economic slowdown," Stephen Green, the Hong Kong-based head of China research at Standard Chartered Plc, said in an e-mailed note, dated Monday and received yesterday. "The central government's balance sheet and tax collection capabilities combined with strong nominal growth should mean this challenge can be met."
Revenue from personal income tax rose an annual 35 percent and money from resource taxes climbed 45 percent, said the ministry, which also cited improvements in collection.
In the short-term, the ministry should budget for infrastructure spending to provide liquidity for troubled projects and stabilize "the most exposed banks," Green said. Other measures could include transferring "a large chunk" of the financing-vehicle loans to a major policy bank, he added.
The gain, reported by the Ministry of Finance on its website yesterday, compared with a 32.4 percent increase in the first quarter from a year earlier.
"Stable" economic growth and rising company profits helped to bolster revenue, with inflation also playing a role, the ministry said. The fiscal strength that encouraged Standard & Poor's to raise China's debt rating in December may help the nation to absorb any fallout from banks' loans going bad after stimulus spending that began in 2008.
"Strong tax revenue should strengthen the fiscal position," said Chang Jian, an economist at Barclays Capital in Hong Kong who formerly worked for the Hong Kong Monetary Authority and the World Bank. "There should be little worry about tax and fiscal revenue growth as the economy keeps growing at 8 to 9 percent."
The economy increased a more-than-forecast 9.5 percent in the second quarter from a year earlier. The nation's first audit of local government debt found liabilities of 10.7 trillion yuan at the end of last year after investment vehicles were used as channels for stimulus spending.
While a "sizable bailout" will be required, China's "local debt problem does not have to trigger a banking crisis or a macro-economic slowdown," Stephen Green, the Hong Kong-based head of China research at Standard Chartered Plc, said in an e-mailed note, dated Monday and received yesterday. "The central government's balance sheet and tax collection capabilities combined with strong nominal growth should mean this challenge can be met."
Revenue from personal income tax rose an annual 35 percent and money from resource taxes climbed 45 percent, said the ministry, which also cited improvements in collection.
In the short-term, the ministry should budget for infrastructure spending to provide liquidity for troubled projects and stabilize "the most exposed banks," Green said. Other measures could include transferring "a large chunk" of the financing-vehicle loans to a major policy bank, he added.
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