Data released by the State Taxation Administration on September 20 shows that in the first eight months of this year, tax revenue collected by tax authorities (excluding customs-collected import VAT, consumption tax, tariffs, and vessel tonnage tax, and before deducting export rebates) increased by 5.9% year-on-year. This figure is 0.5 percentage points higher than the GDP growth rate of 5.4% recorded in the first half of the year.

According to Huang Lixin, head of the Institute of Taxation Science under the State Taxation Administration, since tax revenue is calculated at current prices, its growth this year has broadly matched economic expansion. He identified three primary factors contributing to the slightly faster pace of tax growth relative to GDP.

Price Recovery Effect

The first factor stems from rising prices. The Producer Price Index (PPI), which is closely correlated with tax revenue, turned positive in March this year after 41 consecutive months of negative growth. The index has since shown an overall upward trend, accumulating a 2% increase over the first eight months, which has driven faster growth in tax revenue as calculated at current prices. However, due to the influence of the GDP deflator, price changes have had differing impacts on tax revenue and GDP growth.

Capital Market Activity

The second factor relates to the capital markets. Increased market activity has boosted stamp duty on securities transactions, corporate income tax, individual income tax, and domestic value-added tax. The stock market has been broadly active this year, fueling faster tax growth across related tax categories and industries. Specifically, stamp duty on securities transactions surged by 82%. Related industries also benefited from higher investment returns on stock market holdings. Huang noted that securities transactions and their associated investment gains involve the transfer of ownership of existing assets rather than value created by current production activities. While these transactions directly contribute to tax growth, they generally do not add to GDP in the current period.

Policy Adjustments

The third factor involves policy changes. The VAT Law and its implementing regulations took effect on January 1 this year, accompanied by corresponding adjustments to certain tax policies. At the same time, some tax incentives that do not align with high-quality development principles or current economic conditions have been further standardized. These adjustments affect tax revenue but do not directly contribute to GDP growth.

Chen Binkai, vice president of Central University of Finance and Economics, pointed out that tax revenue is primarily contributed by large enterprises, while small and micro enterprises benefit from numerous tax preferential policies, resulting in their overall tax burden being significantly lighter than that of larger companies. Tax data for the first eight months shows that the top 10,000 taxpayers by tax payment scale contributed nearly half of all tax revenue, while the top 1 million taxpayers accounted for 90% of the total. In contrast, other enterprises, including small and micro businesses, contributed only about 10% of tax revenue.

Chen emphasized that in recent years, China has implemented a series of tax and fee reduction policies benefiting small and micro enterprises. Examples include exempting VAT for small-scale taxpayers with monthly sales below 100,000 yuan and reducing the effective corporate income tax rate for qualifying small and low-profit enterprises to 5%. These measures have played a vital role in easing the tax burden on the vast number of small and micro businesses.