Fiscal revenue should be tied to reductions in GDP growth targets
- By Tan Haojun
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E-mail China.org.cn, February 6, 2015
In fact, it is abnormal to maintain a double-digit growth rate in fiscal revenues with a growth margin double that of GDP in a situation where the economic structure is irrational, the economic growth pattern is backward, the manufacturing industry is mainly focused on low-end manufacturing and enterprise profitability is mediocre in general. It will ultimately result in weak and poor-quality increases in people's incomes and a decrease in enterprises' abilities to develop sustainably. More importantly, the increasing financial burden makes it difficult for most industrial enterprises - particularly manufacturing enterprises - to operate, causing capital to withdraw from enterprises. We should never allow ourselves to think that the withdrawal of capital from industrial entities is due to the impact of the virtual economy, including in the real estate industry. A decline in industrial entities' ability to make profits and an increase in their burdens both contribute significantly to this problem.
Obviously, excessive growth of fiscal revenue is also one of the major reasons for the withdrawal of capital from industrial enterprises. Special attention should be paid to the phenomenon of over-emphasizing the government's benefits and over-taxing enterprises' and individuals' profits, which is worsening the relationship between finance and the economy. Specifically, the relationship between taxation and enterprises is entering the worst period of its history in China.
Some people may say that if fiscal revenue fails to maintain a certain steady growth rate, government operations will encounter difficulties. However, we need to examine what changes have occurred in government operations that have allowed fiscal revenue to maintain high-speed growth for 20 successive years. Where did the newly added fiscal income go? Obviously, this is a question worth asking. In a situation where the distribution and spending of public funds are not effectively supervised, the distribution of social wealth and the efficiency of its use will become less rational as the pace of fiscal revenue growth increases, contributing to a decline in social fairness. Public resources must be distributed and used under effective supervision that must be transparent and open. This is the weakest area in China's fiscal funds management.
We are now in the most difficult time for the economy and for enterprises. What do we need to do to ride out the storm together? We cannot leave enterprises and their workers to weather these difficult times on their own. The government must take the lead during this hardship and save on various expenses. In this way, the fiscal revenue growth rate will be restrained and limited. The current economic situation does not provide the conditions for continued high-speed increase. So while reducing their GDP growth targets, local governments must also lower their fiscal revenue targets, especially those for taxation. The best course of action will be to set these targets below the GDP growth. Never overtax, never count your chickens before they hatch, and never force enterprises to take out loans in order to pay their taxes.
The author is a columnist with China.com.cn.
The article was translated by . Its original version was published in Chinese.
Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.
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