China pushes to shore up government finances with tax rises on several sectors
Beijing targets tax incentives in telecoms and other industries after seeing fiscal revenue drop sharply in late 2025
China has tightened tax incentives and raised preferential rates in several sectors as part of a broader push to generate more government funds, after experiencing a sharp drop in fiscal revenues amid an economic slowdown and persistent deflationary pressure.
The Ministry of Finance and State Taxation Administration released a slew of detailed provisions for the country’s new value-added tax (VAT) law over the weekend, which included raising the rate applied to telecommunication services from 6 per cent to 9 per cent.
China’s three state-owned telecoms giants – China Mobile, China Unicom and China Telecom – all issued announcements on Sunday confirming that the adjustment would have an impact on their revenues and profits.
The Chinese government’s on-budget fiscal revenue – which refers to income raised from taxes, fines and fees – declined by 1.7 per cent in 2025 compared with the previous year, according to data from the finance ministry.
It was the first such contraction China had recorded since 2020 – when the economy was disrupted by lengthy Covid-19 pandemic lockdowns – and fell short of the government’s 0.1 per cent growth target.