MNI POLICY: China Tax Revenue on Personal Incomes Up 11%

China's tax revenue from individual incomes increased by 11.4% y/y as salaries rose amid the recovery from the Covid-19 pandemic and as capital gains increased through channels such as equity transfers, according to the Ministry of Finance

Despite this, the overall fiscal revenue came in at CNY18.29 trillion, dropping 3.9% y/y, in 2020.

The Ministry said in Thursday's online press conference that the result was better than expected as large-scale relief policies, including tax cuts and direct fiscal transfers, helped the economy to recover after Q1 last year. Tax revenue increased by 4.7% in Q3 and 5.5% in Q4 2020.

The Ministry said 80% of CNY3.75 trillion in special-purpose bonds for local governments had been invested in infrastructure, schools, and medical facilities last year.

For 2021, the Ministry said it would expand the scope of use for special-purpose bonds. Special-purpose bonds for local governments are not included in China's general public deficits and are required to be used for certain profitable public projects, MNI noted.

China will keep the macro-leverage ratio basically stable in 2021 and persist in dealing with the risk of the government's implicit debt, according to the Ministry. The government would prevent any increase in implicit debt and take prudential measures to deal with outstanding implicit debts this year.

By 2020, the Chinese government had CNY46.55 trillion in outstanding debts, CNY25.66 trillion of which are local government debts, and the ratio of government debt to GDP was 45.8%. The debt risk is controllable since it is lower than the conventional 60% warning level, according to the Ministry.