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Tax growth slows along with economy

(Xinhua)

08:35, July 26, 2012

BEIJING, July 25 (Xinhua) -- Chinese tax revenues in the first half of the year grew more slowly than a year ago as the economy expanded at its slowest pace since the depth of the global financial crisis, according to data released by the Ministry of Finance (MOF) on Tuesday.

Tax revenues rose only 9.8 percent year on year to reach 5.49 trillion yuan (866.76 billion U.S. dollars) in the world's second-largest economy during the first six months, the MOF said.

Tax growth was down 19.8 percentage points from the same period last year.

The sharp decline in revenue growth gives the Chinese government less room to stimulate the slowing economy.

China's economy grew 7.6 percent year on year in the second quarter of this year, marking the slowest expansion in three years.

Taxes related to the property sector, which used to be the main source of local government revenue, declined as the government maintained its tight grip over the housing market to curb price hikes.

In the first half of the year, contract tax and business tax revenues for the property sector fell 9.9 and 8.5 percent, respectively, from a year ago.

An MOF spokesman said growth in tax revenues picked up a little bit in May and June, however, after the central bank cut the reserve requirement ratio for banks as well as benchmark interest rates to spur the economy.

In the January-June period, China's fiscal revenue -- which comprises taxes, dividends from state-owned enterprises, lottery sales income and other investment income -- grew 12.2 percent year on year to nearly 6.4 trillion yuan, or 19 percentage points lower than the same period last year, the MOF said.

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