Despite Beijing’s repeated promises to reduce the tax burden on companies and individuals, China’s fiscal revenue in the first four months of 2018 surged 16.5 per cent from the same period of last year to 8.9 trillion yuan (US$1.4 trillion).

The pressure on China to lower taxes has been growing since US President Donald Trump unveiled cuts worth US$1.5 trillion in December. But the latest figures from the finance ministry do little to suggest there has been a significant move in that direction.

China’s tax revenue has been growing faster than its economy and corporate income, while the total for the January-April period was the highest ever for the first four months of a year.

After Donald Trump’s move, taxes cut for Chinese firms from factories to farms

Government revenue from corporate income tax rose 13 per cent in the period, while earnings from value-added tax gained 18.4 per cent, the ministry said. In comparison, the value of China’s industrial output in the period increased by just 6.9 per cent.

The figures were even less encouraging for individuals, with revenue from personal income tax leaping 20.8 per cent. That increase was more than four times the average 5 per cent growth in private sector wages announced by the National Bureau of Statistics on Tuesday.

Huang Zhilong, director of the macroeconomic research centre at the Suning Institute of Finance, a private think-tank, said that the spike in fiscal revenue could partly be attributed to local governments scrambling to collect taxes to cover their growing debts.

Beijing’s decision to merge the country’s national and local tax systems might have also resulted in intensified “collection” efforts, he said.

Like US and Hong Kong, China is cutting taxes for its middle class too

The Chinese government has been promising to cut costs for businesses, including reducing taxes, since the end of 2015, and has introduced some measures to do so. Their effect has been limited, however, and overall tax payments have continued on a steep upward course.

Local economists have long called for heftier tax cuts to help Chinese companies compete in the global market, and those appeals have intensified since the December move by the United States.

In response, Beijing said in March that from May 1 it would cut VAT rates for manufacturing companies, transport and construction firms, telecoms operators and farmers by one percentage point, saving them a combined 240 billion yuan a year.

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