Reform of the taxation system will support higher quality development and social fairness: China Daily editorial

Reform of the fiscal and taxation systems is one of the major tasks outlined in the resolution for further deepening reform that was comprehensively adopted at the third plenary session of the 20th Central Committee of the Communist Party of China, held from July 15 to 18.

The changes to be made to the current taxation system will have an impact on the revenue of the central government and that of local governments, and also on the well-being of ordinary residents. It is little wonder that it has caught the attention of people from all walks of life.

The basic framework of taxation has remained unchanged for 30 years since the system of sharing taxes between the central and local governments was established in 1994. With that system, the revenue of the central coffers was secured and so was that of local governments.

Since then, changes have continuously been made to the taxation regime in the past three decades to allow taxation to play its role in reasonably adjusting the distribution of wealth. For example, the income tax for domestic and foreign-funded enterprises was unified in 2008, and later on business tax was changed into value-added tax, which has reduced the tax burden on both enterprises and consumers.

The income tax reform of 2019 increased the share those with higher incomes have to pay, and reasonably cut levies on those breadwinners who have more people to provide for. As a result, the income tax has become more fair. Taxes on environmental protection and biological conservation have greatly promoted the improvement of the environment and ecology.

With new objectives set for the building of a great country in all respects and the rejuvenation of the Chinese nation in the new era, it was inevitable that the taxation system would be further improved to make the system more conducive to high-quality development and the building of a unified market and to further boost social fairness.

The directive outlines the establishment of a clear and balanced fiscal relationship between central and local governments. Key initiatives include increasing local fiscal autonomy, expanding local tax bases, shifting the collection of consumption taxes to later stages and progressively allocating them to local governments, and reasonably expanding the scope of local government bonds. And there is an emphasis on strengthening central government responsibilities and increasing central fiscal spending.

Such measures represent a systematic and forward-looking approach to fiscal policy, providing a solid institutional foundation for improving macroeconomic governance and enhancing the role of fiscal policy in driving economic development. As these reforms take shape, they promise to contribute significantly to the nation's modernization efforts and the establishment of a more resilient and equitable economic system.