China’s fiscal woes highlighted as local authorities turn to fines, traffic tickets to boost revenues
- Local authorities are struggling with slashed revenues resulting from the property sector slump as well as tax rebates as part of efforts to help virus-hit businesses
- Tax revenues from corporations in the first seven months of the year fell by 13.8 per cent from a year earlier to 10.27 trillion yuan (US$1.48 trillion)
A 66,000 yuan (US$9,525) fine for selling substandard celery and a 300,000 yuan (US$43,300) penalty for “jacking up” the price of potatoes may sound extreme.
But unreasonable heavy fines have become an increasingly common measure as local governments in China seek to bring in much needed revenue, revealing the tip of the iceberg for China’s fiscal predicament.
As a grim outlook looms for China’s economy in the face of multiple headwinds, local authorities already stretched thin by the seemingly never ending coronavirus outbreaks are struggling to keep their fiscal balance sheets clean. Revenues fell short of expenditure in all of mainland China’s 31 provinces, municipalities and autonomous regions in the first half of the year.
As China’s economic growth lags, authorities have been struggling with slashed revenues resulting from the property sector slump as well as tax rebates they need to pay as part of efforts to help virus-hit businesses.
They are also struggling under the burden of increased expenditures caused largely by coronavirus-related spending, including the costs of mass testing and social restrictions.
The massive tax cuts and rebates this year aimed to support businesses came at the expense of local public finance
Slowdowns in local economies have led to declining tax revenues from corporations, and in the first seven months of the year, income from the crucial source fell by 13.8 per cent from a year earlier to 10.27 trillion yuan (US$1.48 trillion), according to the Ministry of Finance.