(Yicai Global) Feb. 3 -- Thanks to big tax and fee cuts, China’s macro tax burden in 2022 is expected to have been about 13.8 percent, down 1.3 percentage point from 2021 to a multi-year low. But experts expect a modest pick-up this year.

Macro tax burden refers to the share of government income to total economic output over a certain time period, which is measured by the proportion of taxes to gross domestic product.

A macro tax burden of 13.8 percent last year was quite low, even below those of most countries in the Organisation for Economic Cooperation and Development, said Feng Qiaobin, deputy secretary-general of the Society of Public Finance of China.

Luo Zhiheng, chief economist at Yuekai Securities, linked the declining macro tax burden in 2022 to the economic downturn. Data show that national tax revenue was about CNY16.67 trillion (USD2.5 trillion) last year, down 3.5 percent from a year earlier, the lowest growth rate since 1969. Yet the impact of big tax rebates was greater, he told Yicai Global.

Shi Zhengwen, professor at the China University of Political Science and Law, also said it was precisely the unprecedented strength of last year’s package of tax support policies that led to a short-term fall in fiscal revenue, a significant decline in the macro tax burden, and a lighter burden on enterprises.

New tax and fee cuts, refunds and tax mitigations topped CNY4.2 trillion (USD622.4 billion) in 2022, according to data from the State Taxation Administration.

Tian Zhiwei, vice president of Shanghai University of Finance and Economics’ public policy and governance institute, said that China’s tax burden was low last year, including the tax refund and deferred tax burden of stock retention. Without further change to the tax system, the macro tax burden is expected to recover slightly in 2023.

Shi expects the proportion of taxes to gross domestic product to return to about 15 percent in 2023, or basically the same as in 2020 and 2021.

Experts agree that lower macro taxes are not necessarily better. Only by maintaining the macro tax burden above a certain level can the government provide good conditions for public security, education, medical care, and infrastructure, and ensure stable economic growth and long-term social stability.

In the future, the macro tax burden should remain generally stable, but the government revenue structure can be further optimized, the experts said.

Shi suggested increasing the proportion of direct taxes while reducing the ratio of indirect taxes, and promoting tax reform.

Tian said that in the short term, the government should stop unveiling new universal tax and fee reduction policies. Instead, it should strengthen research on tax-support policies in scientific and technological innovation, income distribution, and green development.

Editor: Peter Thomas