Circular: Distribution of tax revenue to be adjusted

The State Council released a circular on Oct 9 on reforming the distribution of tax revenue between central and local governments after large-scale tax and fee reductions.

As a measure to ease fiscal operations, the reform will establish a more reasonable sharing system between central and local governments for refunds of retained value-added tax (VAT).

The reform also aims to ready local tax systems for further tax cuts.

For VAT revenue, central and local governments will keep their 50 percent share respectively after a two- to-three-year transition period, according to the circular.

Local governments meanwhile are encouraged to develop high-quality industries to expand tax sources.

In addition to the half-and-half VAT system for central and local governments, the share of some local government tax revenues will be balanced among regions within provinces.

The circular decided to transfer consumption taxes on goods from production or import to wholesale or retail sectors to expand tax sources for local governments.

The Ministry of Finance should strengthen the organization and coordination over the reform and prevent interventions in tax collection, according to the circular.