China plans bigger tax, fee cuts in 2022 to prop up slowing economic growth

Tax fee cuts will be larger in 2022 than last year’s 1.1 trillion yuan (US$173.68 billion) in reductions, said Finance Minister Liu Kun

Planned transfer payments to local governments will help largely offset the impact from tax and fee cuts on local governments’ revenues, he added

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China’s tax fee cuts will be larger in 2022 than last year’s 1.1 trillion yuan (US$173.68 billion) in reductions, said Finance Minister Liu Kun on Tuesday. Photo: Simon Song

Published: 3:10pm, 22 Feb 2022

China will unveil bigger tax and fee cuts this year and step up payments to local governments to offset their hit to revenues, Finance Minister Liu Kun said on Tuesday, amid efforts to support a slowing economy.

Tax fee cuts will be larger in 2022 than last year’s 1.1 trillion yuan (US$173.68 billion) in reductions, Liu told a news conference without specifying the size of the planned cuts.

“This year, the central government will significantly increase the size of transfer payments, especially general transfer payments, and continue to favour regions with difficulties and underdeveloped areas,” Liu said.

Planned transfer payments to local governments will help largely offset the impact from tax and fee cuts on local governments’ revenues, he said, adding that such transfer payments topped 8 trillion yuan in 2021.

China’s strong economic recovery from its sharp pandemic-induced slump started losing momentum in the middle of last year, weighed by debt problems in the property market and strict antivirus measures that hit consumer confidence and spending.

Liu acknowledged the difficulty of increasing spending to spur the economy amid declining growth in fiscal revenues.

“We want to properly resolve these issues and hopefully that could be achieved this year,” Liu added.