Chinese
government’s revenue is derived from a number of sources such as value-added
tax, company income tax, business tax, consumption tax, tariffs and
agricultural and related tax. However, the major proportion of the revenue
comes from value-added tax, constituting to 43% of the total revenue. In the
future, the proportion of the tariffs may decrease as China’s entry to the
World Trade Organization advocating free trade would result in removal of
government intervention.
Below is the chart of Chinese government revenue by tax types for the year 2009:
Trends of Chinese government tax composition
VAT has soared from 11% in 1985 to 49% in 1994. Subsequently, there is a
gradual decrease to 43% in 2007. As for business tax, after a steep drop in
1993 to 14%, the proportion of business tax has remained relatively constant
till 2007. However, with respect to income tax, there is a sharp decline
from 53% in 1985 to 24% in 2007. The decrease in income tax is to increase
both the productivity level of the manpower and the level of competitiveness
of businesses in China.
Below is the chart of trends of China VAT, business tax and income tax from year 1985 - 2009:
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