Full Text: Report on China's central, local budgets

NPC, CPPCC Annual Sessions 2009

BEIJING, March 15 (Chinese media) -- The following is the full text of the Report

on the Implementation of the Central and Local Budgets for 2008 and on the Draft

Central and Local Budgets for 2009, which was submitted for review on March 5,

2009 at the Second Session of the Eleventh National People's Congress and was

adopted on March 13:

REPORT ON THE IMPLEMENTATION OF

THE CENTRAL AND LOCAL BUDGETS FOR 2008 AND ON THE DRAFT CENTRAL AND LOCAL

BUDGETS FOR 2009

Second Session of the Eleventh National People's Congress March 5, 2009

Ministry of Finance of the People's Republic of China

Fellow Deputies,

The Ministry of Finance has been entrusted by the State Council to report

on the implementation of the central and local budgets for 2008 and submit the

draft central and local budgets for 2009 for your deliberation and approval, and

also for comments and suggestions from the members of the National Committee of

the Chinese People's Political Consultative Conference (CPPCC).

I. Implementation of the Central and Local

Budgets for 2008

In the face of the grim and complex situations at home and abroad, the

people of all our ethnic groups under the correct leadership of the Communist

Party of China and the guidance of Deng Xiaoping Theory and the important

thought of Three Represents, thoroughly applied the Scientific Outlook on

Development and comprehensively implemented the principles and policies of the

central leadership and the decisions and resolutions of the First Session of the

Eleventh National People's Congress (NPC) in 2008. As a result, we made major

continued achievements in reform, opening up and socialist modernization. The

central and local budgets were satisfactorily implemented and fresh progress was

made in reform and development of the public finance system.

National revenue reached 6.13169 trillion yuan, an increase of 999.512

billion yuan or 19.5% over 2007 (both here and below), equivalent to 104.8% of

the target. This consists of 3.267199 trillion yuan collected by the central

government and 2.864491 trillion yuan collected by local governments. Added to

the 110 billion yuan taken from the central budget stabilization fund, total

revenue came to 6.24169 trillion yuan. National expenditures amounted to

6.242703 trillion yuan, an increase of 1.264568 trillion yuan or 25.4%,

equivalent to 101.7% of the target. This figure consists of 1.337431 trillion

yuan used by the central government and 4.905272 trillion yuan used by local

governments. Added to the 19.2 billion yuan set aside for the central budget

stabilization fund, total expenditures amounted to 6.261903 trillion yuan.

Revenue in the central budget totaled 3.361192 trillion yuan, an increase

of 499.997 billion yuan or 17.5%, equivalent to 103.3%of the target. This

consists of 3.267199 trillion yuan directly collected by the central government

and 93.993 billion yuan turnedover by local governments. Added to the 110

billion yuan from the central budget stabilization fund, total revenue came to

3.471192 trillion yuan. Expenditures in the central budget totaled 3.631992

trillion yuan, an increase of 673.997 billion yuan or 22.8%, equivalent to

102.5% of the target. This figure consists of 1.337431 trillion yuan used by the

central government and 2.294561trillion yuan in tax rebates and transfer

payments to local governments. A total of 19.2 billion yuan was set aside for

the central budget stabilization fund. Total expenditures thus added up to

3.651192 trillion yuan. Expenditures exceeded revenue, leaving a deficit of 180

billion yuan, which was within the target approved at the First Session of the

Eleventh NPC. The outstanding balance of government bonds in the central budget

at the end of 2008 totaled 5.327076 trillion yuan, which was under the set limit

of 5.518585 trillion yuan.

The central government's tax rebates and transfer payments to local

governments. The central government turned over 2.294561 trillion yuan in tax

rebates and transfer payments to local governments in 2008, an increase of

480.772 billion yuan or 26.5%, representing 106.1% of the target. This total

consists of 428.219 billion yuan in tax rebates, up 3.9%, 869.649 billion yuan

in fiscal transfer payments including general transfer payments, a 22% increase,

and 996.693 billion yuan in special transfer payments, a 44.6% increase. The

large increase in this last item was mainly due to the huge increase in

expenditures required to subsidize key local programs such as education and

medical and health care. Tax rebates and transfer payments turned over to local

governments became part of the revenue of local governments, which made

arrangements for their utilization. Transfer payments from the central

government accounted for an average of 38% of local government spending

nationwide and 54.4% in the central and western regions.

Revenue of local governments totaled 5.159052 trillion yuan, an increase of

988.001 billion yuan or 23.7%, equivalent to 106.4% of the target. This consists

of 2.864491 trillion yuan collected by local governments and 2.294561 trillion

yuan in tax rebates and transfer payments from the central government. Local

government expenditures totaled 4.999265 trillion yuan, an increase of 1.079057

trillion yuan or 27.5%, equivalent to 103.1% of the target. This total consists

of 4.905272 trillion yuan spent by local governments and 93.993 billion yuan

turned over to the central government. Revenue exceeded expenditures, leaving a

surplus of 159.787 billion yuan, which mainly came from the surplus revenue in

the central and local budgets that was not spent and will be rolled over into

local budgets this year.

In addition, revenue from government-controlled funds nationwide totaled

1.563635 trillion yuan, an increase of 446.72 billion yuan or 40%. Expenditures

from these funds came to 1.49847trillion yuan, representing an increase of

530.026 billion yuan or 54.7%.

Revenue from the funds controlled by the central government reached 252.566

billion yuan, an increase of 78%. This large increase was mainly attributable to

profits from the sale of lottery tickets coming under budgetary control and

strong growth in revenue from the foreign exchange funds controlled by the

central government. Total revenue includes 20.259 billion yuan from the fund for

developing the Three Gorges Project, 55.504 billion yuan from the fund for

developing railways, 9.621 billion yuan from civilian airport administration and

development fees, 9.148 billion yuan from port development fees, 14.87 billion

yuan from the fund for providing continuing aid to residents relocated to make

way for the construction of large and medium-sized reservoirs, 34.814 billion

yuan in profits from the sale of lottery tickets, and 68.491 billion yuan from

operations of the foreign exchange funds controlled by the central government.

Added to the 55.987 billion yuan from 2007, total revenue came to 308.553

billion yuan. Expenditures by the central government from funds under its

control totaled 205.672 billion yuan, an increase of 94.5%. This includes 20.456

billion yuan from the fund for developing the Three Gorges Project, 62.1 billion

yuan from the fund for developing railways, 5.313 billion yuan from civilian

airport administration and development fees, 10.185 billion yuan from port

development fees, 20.547 billion yuan taken from profits from the sale of

lottery tickets to support social welfare programs, sports, education and other

public service programs, and 68.287 billion yuan from operations of the central

government foreign exchange fund. Added to the 46.489 billion yuan in subsidies

for local governments from the fund for providing continuing aid to residents

relocated to make way for the construction of large and medium-sized reservoirs

and the 56.392 billion yuan rolled over into this year, total expenditures

amounted to 308.553 billion yuan.

Revenue from funds controlled by local governments reached 1.311069

trillion yuan, up 34.5%. This huge increase was mainly the result of the

incorporation of all the income from the transfer of land-use rights into local

budgets. Total revenue includes 1.037528 trillion yuan from the transfer of

land-use rights and compensation for the use of new land for construction and

118.488 billion yuan from road maintenance fees. Total expenditures by local

governments taken from the funds they control increased by 49.9% to reach

1.292798 trillion yuan. This figure includes 1.01725 trillion yuan in

land-related expenditures which consists of 377.815 billion yuan as compensation

for land requisition, housing demolition and resident relocation and subsidy

grants to farmers for land expropriations, a large increase of 113% primarily

attributable to the widespread increase in the level of compensation paid to

farmers dispossessed of their land; and 128.622 billion yuan for developing and

protecting farmland; 14.165 billion yuan for building low-rent housing; 36.988

billion yuan for developing rural infrastructure and developing and protecting

primary farmland; 303.532 billion yuan for promoting urban development; and

156.128 billion yuan generated from the transfer of the land-use rights of

bankrupt state-owned enterprises and those converted into joint stock companies

and used to provide for their laid-off employees. A total of 117.344 billion

yuan was spent in financing road maintenance.

Revenue from government-controlled funds was used exclusively for its intended purposes. The discrepancy between revenue and expenditures from these funds in 2008 arose primarily as a consequence of the requirement to roll over a portion of this revenue into this year in accordance with the measures for managing these funds.

　

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Following is an overview of budget implementation and financial work in

2008:

1. Budgetary revenue growth and use of surplus revenue

Thanks to intensified efforts in revenue collection and management by tax,

customs and public finance departments in addition to economic development,

overall revenue growth was fairly rapid, though growth in the second half of the

year was noticeably more sluggish. Thanks to rapid economic growth and good

corporate performance in the first half of the year, plus special factors such

as the 2007 surge in corporate profits, increase in corporate income tax

receipts and the effect of tax policy adjustments, national revenue grew by

33.3%. None of these special factors were present in the second half of the

year. Due mainly to the impact of the global financial crisis, economic growth

slowed and corporate profits weakened. Following a big cut in the corporate

income tax rate in 2008, a series of policies to reduce or exempt taxes and fees

were introduced to strengthen and improve macro-control through management of

public finance and promote steady and rapid economic growth. This led to the

slower growth in national revenue. National revenue grew by 5.2% in the second

half of the year, while revenue collected by the central government dropped by

0.9%.

Main revenue items in the central budget. Domestic VAT reached 1.349742

trillion yuan, up 16.3% and equivalent to 100.7% of the target. Domestic sales

tax reached 256.78 billion yuan, a rise of 16.4% and equivalent to 104% of the

target. VAT and sales tax on imports amounted to 739.107 billion yuan, up 20.1%

and equivalent to 107.8% of the target. VAT and sales tax rebates for exports

totaled 586.59 billion yuan, up 4.1% and equivalent to 102% of the target, which

represents a decrease in revenue by the same amount. Business tax totaled 23.21

billion yuan, an increase of 14.5% and equivalent to 103.2% of the target.

Corporate income tax registered 717.34 billion yuan, a rise of 27% and

equivalent to 111.6% of the target, with the high increase mainly due to the

large increase in corporate income tax in 2007. Individual income tax reached

223.418 billion yuan, up 16.9% and equivalent to 110.1% of the target, with the

large increase mainly due to the growth of per capita disposable income for

urban residents and improved collection and management. The securities

transaction stamp tax reached 94.968 billion yuan, down 51.2% and equivalent to

48.8% of the target, with the shortfall due to a large decline in revenue

triggered by the sluggish stock market, the reduction of the securities

transaction stamp tax rate and the scrapping of the stamp tax on stock

purchases. Tariffs hit 176.995 billion yuan, an increase of 23.6% and equivalent

to 110.6% of the target, mainly due to the rapid growth of general imports.

Non-tax revenue hit 170.451 billion yuan, up 23.6% and equivalent to 118.4% of

the target, with the high increase mainly due to the increase in fees for

mineral prospecting and mining rights and resource consumption charges as well

as mineral resource compensation fees following reform of the system for paid

use of resources.

The use of surplus revenue. National revenue exceeded the budget target by 283.09 billion yuan, including a 108.02 billion yuan surplus in the central budget. The main reasons for the surplus are as follows: increases in real terms in economic indexes directly related to tax revenue, including the value-added of industry and commerce, total fixed asset investment, total volume of imports and exports and total retail sales of commodities, exceeded the projected figures. In addition, the increase in corporate income tax added to national revenue by a large margin due to the considerable increase in corporate profits in 2007. Surplus revenue in the central budget was used in the following areas in accordance with relevant laws and regulations as well as resolutions and decisions of the First Session of the Eleventh NPC. A total of 18.5 billion yuan was used to increase tax rebates and transfer payments to local governments. Two billion yuan was spent on education, the bulk of which went to students in the quake zone in need of special temporary assistance. Another 500 million yuan went to science and technology for independent research and development work on major scientific research equipment. Four billion yuan of surplus revenue from vehicle purchase tax receipts was transferred to the central government fund for post-earthquake recovery and reconstruction to rebuild damaged roads through expenditures from vehicle purchase tax receipts. Another 29.1 billion yuan was used to increase subsidies for agriculture, fisheries, forestry and other industries to offset the increases in the prices of refined petroleum products in June. An additional 4.7 billion yuan went to providing disaster relief, handling public emergencies and providing further relief for victims of massive natural disasters, the earthquake and the baby milk formula scandal. In response to the global financial crisis and in order to further boost domestic demand, the central government increased spending by 30 billion yuan mainly to build low-income housing and major infrastructure facilities. Finally, 19.2 billion yuan was added to the central budget stabilization fund to be incorporated into the budget in the years ahead. The State Council has reported the use of the surplus in 2008 to the Standing Committee of the Eleventh NPC.

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