2. A combination of fiscal and tax tools was used to promote steady and rapid
development of the economy. On the basis of the prudent fiscal policy, we in
2006 revised and enhanced policy tools in response to economic developments and
changes, relaxing control in some areas and tightening it in others, to make the
regulatory function of public finance more effective and better focused. First,
we adjusted and improved relevant tax policies. On April 1, 2006, we began
making the biggest adjustment in the items and rates of the consumption tax seen
since 1994, increasing some items and rates and lowering others. We raised the
salary threshold for the personal income tax and increased the deductible amount
for the personal income tax for employees of domestic enterprises from 800 yuan
per month to 1,600 yuan per month. We adjusted the policy on the natural
resources tax. We also adjusted export rebate rates for some products,
eliminating or reducing export rebates for more products whose production is
high in energy consumption or is highly polluting. In addition, more commodities
were added to the list of those not eligible for the processing trade. We
introduced export tariffs on some products whose production is high in energy
consumption or is highly polluting while lowering import tariffs on some
resource products. Tax reforms such as the trial VAT reform in northeast China
made steady progress. Adjusting and improving tax policies played a positive
role in conserving resources, protecting the environment, guiding consumption in
the right direction and indirectly improving income distribution.
Second, we made necessary adjustments in the scale of central government
allocations and improved the utilization structure. Central government
allocations in 2006 totaled 125.4 billion yuan (including 10 billion yuan from
surplus revenue). These funds were mainly used to fund items such as the
building of a new socialist countryside, social programs, environmental and
ecological protection and the large-scale development of the western region and
to fund an appropriate number of major new projects with overall bearing on
development. Moreover, the pace of implementation of the budget was regulated to
keep it in line with the overall situation in economic development, and the
performance of government funds was improved by strictly managing investment and
tightening oversight.
Third, we adjusted and standardized fiscal and tax policies for managing
housing and real estate revenue and expenditures. The required length of
ownership when resale of privately owned housing is exempt from business tax was
raised to five years from the two-year requirement stipulated in 2005. We
improved the system for managing public accumulation funds for housing, further
clarified the source of funding for building low-rent housing in urban areas and
ensured that the funding was available. We also adjusted standards for fees for
using land for new construction projects, revised land-use policies and
formulated policies to standardize the use of revenue derived from the transfer
of state land-use rights, yielding initial results in curbing speculation in the
housing market. We made further progress in implementing the strictest possible
system for protecting farmland and promoted more efficient and intensive use of
land.
Fourth, we worked out and implemented fiscal and tax policies to encourage
energy conservation and development of new energy resources. Responding to the
high oil prices, we carried out a great deal of research on how to stimulate
development of oil substitutes, formulated the policy to support the development
of bioenergy, and set up the basics for a system of fiscal and tax policies to
promote the development of alternative energy sources. In addition, we
overhauled the mechanism for setting oil prices and introduced a special
surcharge on oil sales. The above measures, along with other control measures,
played an important role in maintaining the direction for economic development
expected under the guidance of macroeconomic regulation.
3. Budgetary support for agriculture, rural areas and farmers was increased
and a good start was made in efforts to build a new socialist countryside.
Effective policies, numerous measures and new mechanisms were introduced to give
budgetary support for agriculture, rural areas and farmers in 2006. As a result,
the countryside began to feel more and more warmth from increased public
spending. A total of 339.7 billion yuan (excluding the 12 billion yuan paid to
grain farmers in direct subsidies from special surcharge on oil sales) from the
central budget was allocated in 2006 for agriculture, rural areas and farmers,
42.2 billion yuan or 14.2% more than the amount for 2005.
