The fiscal surplus in China during the H1 2008 surged to 1.19 Trillion Yuan owing to high corporate income tax but it could decline in H2 on account of rising fiscal expenditure.
The Ministry of Finance (MOF), China, revealed that the fiscal surplus in the country reached 1.19 Trillion Yuan ($173.7 Billion) in H1 2008, as reported by China Daily.
The Ministry revealed that the budget revenue in the first six months of 2008 increased 33.27% to $507.4 Billion over the same period previous year. The budget expenditure also surged to $332.4 Billion in H1 2008, an increase of 59.52% against the same period last year. Besides, the state earned around $115.3 Billion through corporate income tax in H1 2008, higher by 41.5% against January-June 2007.
The tremendous increase in fiscal revenue during the first half of 2008 in China was based on higher corporate tax filing by companies. In 2007, enterprises saw huge profits, as a result, they paid heavy income tax that raised the fiscal revenues substantially. Besides, the upsurge in corporate income also got support from rising prices of commodities, which, in turn, pushed up the fiscal revenue in the country.
Further, the fiscal revenue increased with rising import turnover tax, a major part of the taxation. Given that Yuan has appreciated against dollar, the import in China boosted greatly, leading to high turnover tax. Increasing imports also drove up the corporate income tax that played a key role in augmenting the fiscal surplus in H1 2008.
However, the industry experts have proposed reduction in taxes in view of rising fiscal surplus so that the growth in both enterprises and macroeconomy could be maintained. However, China is not expected to gain the same profits in the second half of 2008 as the fiscal expenditure might increase in coming months. A big share of the revenue will go in the rehabilitation of quake affected people, medical care and education.
According to a Research Analyst at RNCOS, “The fiscal surplus in China increased tremendously in H1 2008 primarily due to rise in corporate tax. The fiscal revenue plays a key role in the GDP of the country and making economy stronger. However, rising fiscal expenditure in the second half of 2008 might reverse the condition.”
