The overall situation in the implementation of the central budget in 2006
is as follows:
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 additional24.1 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.
