(Yicai) June 24 -- China’s tax haul slumped 5.1 percent in the five months ended May 31 from a year earlier, mainly due to more tax breaks, different calculation methods and last year's repayment of deferred taxes, industry insiders said.

The nation raked in CNY8 trillion (USD1.1 trillion) in taxes from January to May, according to the Ministry of Finance. But after deducting the impact of special factors, growth was around 0.5 percent. By comparison, China's economy expanded 5.3 percent in the first quarter.

These special factors have to do with the recent end of some tax concessions, market insiders said. During the Covid-19 pandemic in 2022, the Chinese government partially postponed tax payments for micro, small and medium-sized manufacturers, including value-added tax, corporate income tax, and personal income tax. These taxes were due in the first few months of 2023, which raised the base line, impacting this year’s growth rate.

Tax breaks in four categories, including personal income tax and value-added tax, that were introduced last year have also had an impact. Revenue from personal income tax slumped 6 percent in the first five months from a year earlier due to tax deductions rolled out in September last year.

Although the overall economy has recovered, weak demand has led to lower prices and the prolonged decline of the producer price index, a gauge of industrial profits, said Luo Zhiheng, chief economist of Yuekai Securities. This has meant that the tax haul is growing at a slower pace than the economy.

However, it is not unusual for the two growth rates to differ. Taxes are calculated at current or actual prices while economic growth is calculated at constant prices, which are adjusted to account for inflation.

In order to make up for the sliding tax revenue, non-tax revenue has maintained rapid growth.

Non-tax revenue in the first five months surged 10.3 percent to CNY1.65 trillion (USD227 billion), according to Ministry of Finance data. This is mainly generated by the activation of state-owned resources and assets through multiple channels, such as revenue from the leasing, lending and sale of state-owned assets of an administrative and institutional nature as well as revenue from the paid use of municipal and public resources.

In the first five months, national general public budget revenue dipped 2.8 percent to CNY9.6 trillion (USD1.3 trillion), but after deducting special factors, growth was about 2 percent. While national general public budget expenditure climbed 3.4 percent to CNY1 billion (USD137.7 million).

Editor: Kim Taylor