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Documents
10th NPC & CPPCC, 2007> Documents
UPDATED: March 20, 2007 from china.org.cn
China's Budgets Report
Following is the full text of the Report on the Implementation of the Central and Local Budgets for 2006 and on the Draft Central and Local Budgets for 2007, delivered at the Fifth Session of the 10th National People's Congress on March 5, 2007
Ministry of Finance
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1. Collection and management of revenue was improved in accordance with the law and a high rate of revenue growth was maintained. The Chinese economy enjoyed rapid growth, achieved good performance and maintained relatively low prices in 2006. Based on this, financial, tax, and customs authorities at all levels improved revenue collection and management, actively applied scientific management methods, made a full review of preferential tax policies and standardized them, stringently controlled tax reductions and exemptions and worked hard to collect all taxes due, resulting in rapid growth of revenue of the central and local governments. The increase in revenue is mainly a reflection of China's vibrant economy, but it also demonstrates that the country's revenue collection system is gradually improving and that China's revenue development is stable and balanced to some extent. However, it should be noted that although the key factor behind the rapid increase in revenue is the vibrant state of the Chinese economy with its improved efficiency, other factors, including one-time factors, government polices and non-regular factors also contributed to the increase. These other factors mainly consist of the following: The corporate tax paid by state-owned commercial banks such as the Bank of China and the China Construction Bank increased by a large margin due to increased profits after they became publicly traded companies. A special surcharge was instituted on oil sales. Income from the transfer of mineral exploration and mining rights was incorporated into revenue. Due to the effect of rapid growth in fixed asset investment and industrial production, as well as increases in the prices of resource products, the increase in tax payments from affected industries was also greater than normal. Deducting the increase in revenue due to these factors would result in a growth rate for revenue basically in line with the economic growth rate.

Revenue in the central budget for 2006 exceeded the projected figure by 257.3 billion yuan (before deducting the amount applied to resolve unpaid export tax rebates). Disposal of this surplus amount was carried out according to the uniform planning and arrangement of the Central Committee and the State Council and in accordance with the Budget Law, the Decision of the NPC Standing Committee on Improving Examination and Oversight of the Central Budget and relevant resolutions passed at the Fourth Session of the Tenth NPC. In addition to spending 23.1 billion yuan of the surplus to increase tax rebates and transfer payments for local governments and 1.6 billion yuan to increase spending on education as required by relevant laws, statutes and financial regulations, the central government mainly used the surplus to strengthen weak links in economic and social development, clear up overdue payments and reduce the budget deficit to make financial and economic development more sustainable. Specifically, an additional 24.1 billion yuan was spent on the social safety net and an additional 37.2 billion yuan from special surcharge on oil sales was spent to subsidize increased expenditures in agriculture, fishery and forestry due to price increases in oil and to fund major projects in energy development and conservation and in environmental protection. Another 10 billion yuan was spent to increase regular investment in the central budget, which was mainly used to support the building of a new socialist countryside, and an additional 13.5 billion yuan in special expenditures went toward building roads, purchasing oil reserves and providing further aid to residents relocated to make way for the construction of large and medium-sized reservoirs. An additional 3.5 billion yuan was spent to increase funding for the "three rewards and one subsidy" policy, subsidies for farmers and herdsmen in Tibet and for the fight against smuggling, and transfer payments to ports. The additional 61.3 billion yuan that was earmarked for export tax rebate payments was used to clear up the remaining overdue payments. A total of 20 billion yuan was spent to reduce the deficit in the central budget. Another 13 billion yuan was reserved for funding reform of the salary system and related expenses in 2007. In addition, 50 billion yuan was allocated to establish a central budget stability and regulation fund to make compilation of the budget more scientific and appropriate and maintain the stability of the central budget and the continuity of the fiscal policy. Funding and use of the stability and regulation fund come under the scope of budgetary management and are subject to the oversight of the NPC and its Standing Committee. The State Council has reported the above arrangements for the use of the surplus to the NPC Standing Committee.

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