Fiscal authorities have indicated that the nation's tax collection trajectory remains broadly consistent with the pace of economic expansion, despite a marginal variance in the growth rates. Data released by the State Taxation Administration on September 20 reveals that tax revenue collected by the tax departments—excluding customs-levied import VAT, consumption tax, tariffs, and vessel tonnage tax, and before deducting export rebates—rose 5.9% year-on-year for the first eight months of the year. This figure slightly outpaced the nominal GDP growth rate of 5.4% recorded for the first half, marking a difference of just 0.5 percentage points.

Huang Lixin, Director of the Research Institute under the State Taxation Administration, attributes this slight overperformance to three key factors. Since tax revenue is calculated at current prices, its overall growth this year has fundamentally kept pace with economic growth.

The impact of price fluctuations. The Producer Price Index (PPI), which is closely tied to tax revenue, turned positive in March after a prolonged 41-month period of negative growth, subsequently accelerating and registering a cumulative increase of 2% in the first eight months. This has driven faster growth in tax revenue calculated at current prices. However, the effect of prices on GDP growth in the first half was expressed through the GDP deflator—estimated at 0.7%—illustrating a divergence in how price factors influence tax revenue versus GDP.

Capital market activity. Robust trading in capital markets has spurred growth in several tax categories, including the stamp tax on securities transactions, corporate income tax, individual income tax, and domestic VAT. The stock market has been notably active this year, with the average daily trading volume on the A-share market in the first eight months up 72.8% compared to the same period last year. This has accelerated tax collection in related sectors, with the stamp tax on securities trading surging 82% and individual income tax on restricted share transfers up 59.7%. Tax revenue from the securities industry grew 65.6%, while revenue from insurance and other financial industries increased by 14.6% and 18.5%, respectively. Other industries have also benefited from gains on corporate equity investments. It is important to note that securities transactions and their associated gains represent transfers of existing asset ownership, not newly created value from current production activities. While this contributes directly to tax revenue, it typically does not bolster the current period's GDP.

Policy adjustments. The implementation of the Value-Added Tax Law and its ancillary regulations effective January 1st has necessitated adjustments to certain tax policies. Additionally, regulations on tax incentives that were deemed incompatible with high-quality development or the current economic landscape have been standardized, leading to increased tax income. These policy changes, however, do not directly generate GDP growth.

Citing these combined dynamics, Director Huang maintains that the pace of tax revenue growth, while marginally higher than GDP growth, remains fundamentally aligned with the expansion of the economic tax base. This, he added, showcases the resilience and vitality of the Chinese economy. Further tax data for the first eight months reveals that the top 10,000 enterprises by tax payment contributed nearly half of the total tax revenue, and the top one million companies accounted for around 90%. The remaining one-tenth was paid by other businesses, including a vast number of small and micro enterprises. Chen Binkai, Vice President of Central University of Finance and Economics, analyzed that the series of tax and fee reduction policies China has rolled out in recent years for small and micro enterprises has played a crucial role in reducing the tax burden on this extensive segment of businesses.