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In Step with Tax Cuts, Adjust Fiscal Revenue Targets If Necessary

Local authorities should put the tax reduction policy before their fiscal revenue target, and adjust the latter if necessary

By Xu Mouquan Updated Jul.12

When local fiscal revenue targets conflict with the State’s tax reduction programs, local governments need to adjust their budgetary income and expenditure targets to ensure the program is fully implemented, argued Chen Yikan, a correspondent with yicai.com, in a piece for the news portal.

During recent interviews with local tax officials, Chen found a dilemma facing them: local governments set a relatively high fiscal revenue target, which is now hard to meet after the central government rolled out in March the two trillion yuan-worth tax and fee cut package – larger than expected. 

The situation is likely to get worse, given a larger-scale tax and fee cut program is expected for the second half of the year, in addition to the downward pressure on economic growth and complicated external conditions.

Under this condition, they should put the tax reduction policy before the revenue target, and adjust the latter if necessary, he proposed. 

Tax cuts are national-level policies, which will stabilize growth and employment, spur businesses to invest more in innovation and increase competitiveness, and nurture the tax base and increase economic development potentials, Chen said.

When the fiscal revenue target is unable to be met after all necessary means, a sensible way is to adjust it, not to meet it through over-taxing or new fees – which will reverse the effects of tax cuts and market expectations, he warned. 

And in fact, the State also encourages local governments to adjust their budgets in light of the actual situation, he noted. Local authorities should also curtail their regular expenditure, such as office, meeting, training and hospitality spending, he wrote. Expenditure related to people’s livelihoods, however, should be guaranteed.