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Interest Tax Gets the Credit
Resuming the taxation on bank deposit interest has played an active role in helping slow down the increase of savings deposits and in stimulating the country's economic growth, officials and experts said.
"The country has basically reached its aim to push Chinese people to divert part of their savings to consumption and investment by levying the tax," said an expert with the Chinese Academy of Social Sciences, who gave his name as Yang.
New deposits stood at 376.7 billion yuan (US$45.4 billion) during the first 10 months of this year, according to statistics, a drop of 213.5 billion yuan (US$25.7 billion) from the same period last year.
Outstanding deposits by residents amounted to 6.312 trillion yuan (US$760.5 billion) by the end of October.
"Chinese residents began to increase spending in consumption and investment," Yang said.
Figures from the National Bureau of Statistics show that retail sales surged 9.9 per cent year-on-year during the first three quarters of 2000.
Fixed assets investment by individuals and collectives increased by 8 per cent year-on-year during the first six months, 2-3 percentage points higher than 1999.
"A certain amount of money has flown to the capital market," Yang said.
Statistics from the Shanghai branch of the Agricultural Bank of China reveal that more than 30 per cent of the deposits taken out by local residents went to the stock market.
About 50 per cent of treasury bonds were bought by local residents who used their deposits.
Sun Ruibiao, a deputy director of the State Administration of Taxation, said the structure of personal savings deposits had changed since the resumption interest taxation.
The amount of current account deposits surged while the amount of long-term deposits dropped, Sun said.
The State began to levy the tax, which accounts for 20 per cent of the interest income, on November 1, 1999. Before the tax, economists feared China would face deflation as retail prices had been falling for more than 20 straight months.
The tax revenue has been growing every month since then.
During the first 10 months of this year, interest tax revenue exceeded 12 billion yuan (US$1.45 billion).
An expected 15 billion yuan (US$1.8 billion) is to be gathered by taxing savings interest, Sun said.
"The tax revenue will continue to grow next year," he said.
Revenues generated from the interest tax were mainly used to finance the lower-income group and workers laid-off from the State sector and to reimburse retirees for overdue pensions, he said.
Source: China Daily
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