(Yicai) Sept. 23 -- China’s fiscal income dropped 2.6 percent in the first eight months from a year earlier, mainly because of the tax cuts and deferrals of the past two years aimed at providing financial relief to businesses.

General public budget revenue was CNY14.8 trillion (USD2.10 trillion) in the January to August period, according to finance ministry figures released on Sept. 20. If the lower taxes and deferrals are factored out, revenue rose about 1 percent.

Income from taxation fell 5.3 percent to CNY12.1 trillion (USD1.72 trillion), while non-tax revenues jumped 11.7 percent to CNY2.7 trillion (USD382.6 billion).

In the wake of the pandemic, China introduced a tax deferral policy for small and medium-sized manufacturers in 2022. The delayed taxes were accounted for last year, raising the base of comparison for this year. New tax and fee reduction policies introduced in the second half of 2023 have also weighed on this year’s revenue.

The rapid growth of non-tax revenue is attributed to China’s local governments stepping up efforts to reinvigorate existing assets and resources to make up for the reduced tax intake.

Government funds were also hit by the sustained weakness in the real estate market. According to the ministry’s data, national government fund income, which is mainly underpinned by land sales, slumped 34.4 percent to CNY352.6 billion (USD50 billion) in the period.

But general public budget revenue will recover in the coming months as the government’s macroeconomic policies take effect and the economic recovery strengthens, a finance ministry official said.

Experts told Yicai that government income will drop this year compared with 2023, since it will be hard to overcome the effects of declining revenue from land sales. 

Editors: Shi Yi, Tom Litting