China pushes to shore up government finances with tax rises on several sectors

China is increasing tax rates in several sectors to bolster government finances, which have been strained by an economic slowdown and deflationary pressures. The Ministry of Finance and State Taxation Administration recently released provisions for the new VAT law, including raising the tax rate on telecommunication services from 6% to 9%. China's state-owned telecom companies, including China Mobile, China Unicom, and China Telecom, have confirmed the tax increase will impact their revenues and profits. This move comes after China's on-budget fiscal revenue declined by 1.7% in 2023, marking the first contraction since 2020 and falling short of the government's growth target. The tax increases are an attempt to address the pressure on government finances caused by slower economic growth and a prolonged property downturn.

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