Top 10,000 taxpayers contributed nearly half of total tax revenue in first 8 months

Tax revenue data for the first eight months of this year shows a 5.9% year-on-year increase in tax collections by tax authorities (excluding import VAT and consumption tax, customs duties collected on behalf of Customs, and vessel tonnage tax, and before deducting export tax rebates). This growth rate is 0.5 percentage points higher than the nominal GDP growth rate of 5.4% recorded in the first half of the year.

Huang Lixin, director of the Tax Science Research Institute of the State Taxation Administration, noted that since tax revenues are calculated at current prices, tax growth has generally been broadly consistent with economic growth this year. He identified three main factors driving tax growth slightly faster than GDP growth.

Key Drivers of Tax Revenue Growth

1. Price Increases

The Producer Price Index (PPI), which is highly correlated with tax revenues, turned positive in March this year, ending 41 consecutive months of negative growth. Its growth rate subsequently increased, rising by a cumulative 2% in the first eight months, thereby boosting relatively fast growth in tax revenues measured at current prices. However, the impact of prices on GDP growth in the first half of the year was reflected in the GDP deflator (estimated at 0.7%), indicating differences in how price factors affect tax revenues and GDP growth.

2. Capital Market Activity

Transactions in capital markets drove growth in several tax categories, including:

• Stamp duty on securities transactions
• Corporate income tax
• Individual income tax
• Domestic value-added tax

Capital markets have been relatively active overall this year. Average daily A-share trading volume reached 2.7 trillion yuan in the first eight months, up 72.8% year on year. This boosted rapid growth in related taxes and sector-specific tax revenues:

• Stamp duty on securities transactions rose 82%
• Individual income tax on gains from transfers of restricted shares increased 59.7%
• Tax revenues from the securities industry grew 65.6% year on year
• Tax revenues from the insurance sector rose 14.6%
• Tax revenues from other financial sectors rose 18.5%

Tax revenues from other industries also benefited from increased returns on stock market investments by relevant enterprises. However, securities transactions and the investment income they generate involve transfers of ownership of existing assets rather than value created through current production activities. While they can directly boost tax revenues, they do not substantially add to current-period GDP.

3. Policy Adjustments

The Value-Added Tax Law of the People's Republic of China and its implementing regulations officially took effect on January 1 this year, prompting corresponding adjustments to certain tax policies. At the same time, the state standardized some tax incentives that were inconsistent with high-quality development or current conditions, leading to increased tax revenues. However, such policy adjustments do not directly drive GDP growth.

"Under the combined influence of these factors, tax revenue growth has been slightly higher than GDP growth, but it remains broadly consistent with the growth of the economic tax base, reflecting the resilience and vitality of China's economic development," said Huang Lixin.

Tax Burden Distribution: Large Enterprises vs. Small and Micro Enterprises

Chen Binkai, vice president and professor at the Central University of Finance and Economics, who has long studied income distribution and development economics, analyzed that from the perspective of taxpayers, tax revenues are primarily contributed by large enterprises, while small and micro enterprises benefit from numerous preferential tax policies, resulting in a significantly lower overall tax contribution compared with large firms.

Tax data for the first eight months of this year shows:

• The top 10,000 largest taxpayers accounted for nearly half of total tax revenues
• The top one million taxpayers contributed about 90% of total tax revenues
• Other enterprises, including small and micro businesses, paid only around 10%

"This is because China has implemented a series of tax and fee preferential policies benefiting small and micro enterprises in recent years—for example, exempting VAT small-scale taxpayers with monthly sales below 100,000 yuan from VAT, and reducing the effective corporate income tax burden for qualifying small and low-profit enterprises to 5%—which have played a very important role in lowering the tax burden on the vast number of small and micro enterprises," Chen explained.