China's fiscal revenues dropped steeply in April after a slight recovery in March and the outlook for the rest of the year is grim, the Ministry of Finance said on Thursday. Combined central and local government revenues fell 13.6 percent from a year earlier, a far sharper decline than the 0.3 percent drop in March and the 1.2 percent drop in February.
Government spending in April surged 24.5 percent from a year earlier as Beijing implemented its 4 trillion yuan ($585 billion) stimulus package to prop up domestic demand as the economy slows. "The problem of rising expenses and falling revenues will get worse and the full-year fiscal outlook is grim," the ministry said in a statement on its website.
Government outlays in the first four months totalled 2.05 trillion yuan, while spending was 1.79 trillion yuan. That left China with a fiscal surplus of 265 billion yuan through April, but the bulk of spending tends to come in the later months of the year, putting the country on track for an overall deficit. Beijing is targeting an annual budget deficit of 950 billion yuan this year. The ministry said the deterioration in revenues in April was caused by lower receipts from corporate income tax and increased tax rebates for exporters. Revenues from corporate income tax fell 81.6 percent in April from a year earlier.
To cushion the economy from the financial crisis, China has increased tax rebates for exporters, lowered taxes on vehicle and housing purchases and reformed the value-added tax to be based on consumption rather than production. Premier Wen Jiabao has said the government's tax reforms could save companies about 500 billion yuan in taxes this year.
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