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In the Economic Downturn, Local Governments Increase Tax and Fines

According to Xinhua, the Ministry of Finance recently released statistics showing that China’s national revenue increased by 8.8 percent in the first 6 months of 2014, as compared to the same period in 2013. Of the national revenue increase, tax revenue grew by 8.5 percent and non-tax revenue by 11.1 percent. The national GDP increased by 7.4 percent. 

According to Zhou Tianyong, an official from the Chinese Communist Party Central Party School, the tax rate was 36 percent in 2013, but was increased to 44 percent in the first 6 months of 2014, an increase of 8 percentage points. This increase occurred in spite of slower GDP growth, slower consumption and investment growth, and a negative growth in exports. 
Zhou asked, “What does this tell us? Local governments are increasing taxes and fees right in the middle of the economic downturn. It is, in fact, a fiscal mechanism of local governments based on fines and tax increases.” 
 Source: Xinhua, July 30, 2014