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China’s revenues plummet 41% on tax cuts to ease Covid pains

(Bloomberg) – China’s overall tax revenue plunged 41% in April as the government gave money back to taxpayers to help companies weather the impact of Covid restrictions that have weighed on the economy.

The government’s revenue from taxes and fees totaled 1.23 trillion yuan ($182 billion) in April, according to a Bloomberg calculation using official data released Tuesday, but the monthly figure is unrelated Withdraw total for the current year.

Revenue for the first four months of the year totaled 7.43 trillion yuan, down 4.8% from the same period last year, the Ministry of Finance said in a statement. Revenue for the period would have increased 5% from a year earlier had it not been for the tax refunds, the ministry said.

In early March, the government said it would provide about 2.5 trillion yuan in tax breaks this year, including 1.5 trillion yuan in rebates. That amount – more than double what it was in 2021 – was announced as the government sought to prop up an economy facing a slump in the property market and an expected slowdown in export growth.

Since that support was announced, a surge in Covid cases and lockdowns in Shanghai and other cities have made financial aid even more necessary for businesses grappling with a massive drop in consumer spending and disruption to supply chains.

Businesses actively applied for tax refunds in April when the government’s rebate policy took effect on a large scale, Xu Hongcai, a deputy finance minister, said at a briefing on Tuesday. About 800 billion yuan in previously collected VAT has been returned to taxpayers, exceeding government expectations, he said. The drop in sales in April was due to the “active fiscal policy” needed to counter the downward pressure on the economy, Xu said.

“It’s designed to benefit businesses and boost market vitality at the expense of tax revenues,” he said. “With the impact of the measures taken to coordinate the fight against Covid and economic development, tax revenues will recover steadily.”

However, there are also indications that the slowdown in economic activity and the real estate downturn are taking a toll on the treasury. Revenue from deed taxes paid when buying or selling a property fell 27.4% in the first four months of 2022, and revenue from land sales fell nearly 30% from a year earlier, according to Bloomberg calculations, according to Treasury Department figures.

Tax revenues from vehicle purchases fell by 28.3% in the first four months of 2022 compared to the previous year. Shanghai’s lockdown meant not a single car was sold there over the past month, and nationwide auto sales in April fell at their most in two years, down nearly 36% from a year earlier to 1.06 million units, data released last week of the China Passenger Car Association showed .

General tax spending, which funds spending on education, health care, scientific research, etc., rose 5.9% to 8.1 trillion yuan in the first four months of this year, according to MOF.

©2022 Bloomberg LP

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