BEIJING, March 17 (Xinhua) -- Following is the full text of the report on the execution of the central and local budgets for 2016 and on the central and local draft budgets for 2017, which was submitted for review on March 5, 2017 at the Fifth Session of the 12th National People's Congress and was approved on March 15, 2017:

REPORT ON THE EXECUTION OF THE CENTRAL AND LOCAL BUDGETS FOR 2016 AND ON THE DRAFT CENTRAL AND LOCAL BUDGETS FOR 2017

Fifth Session of the 12th National People's Congress of the People's Republic of China

March 5, 2017

Ministry of Finance

Esteemed Deputies,

The Ministry of Finance has been entrusted by the State Council to submit this report on the execution of the central and local budgets for 2016 and on the draft central and local budgets for 2017 to the present Fifth Session of the 12th National People's Congress (NPC) for your deliberation and for comments from the members of the National Committee of the Chinese People's Political Consultative Conference (CPPCC).

I. Execution of the Central and Local Budgets for 2016

In 2016, we were faced with challenging and complicated environments both in China and abroad. However, under the leadership of the Central Committee of the Communist Party of China (CPC) with Xi Jinping at its core, all localities and departments strived for progress while working to keep performance stable, upheld China's new development philosophy, and focused on supply-side structural reform while seeking an appropriate expansion of aggregate demand. As a result, we achieved steady and sound economic and social development and kicked the 13th Five-Year Plan for Economic and Social Development (2016-2020) off to a good start. Execution of the budgets was satisfactory.

1. Implementation of the NPC resolution on the budgets

Departments of finance improved rule of law awareness in the execution of the budgets, actively performed our functions, and conscientiously implemented the resolution adopted at the Fourth Session of the 12th NPC on the budgets as well as the views given by the NPC Financial and Economic Affairs Commission on the budgets.

-- Implementing proactive fiscal policy

Large-scale cuts were made to taxes and fees. In extending trials to replace business tax with VAT to all industries, we carried out trials in the construction, real estate, financial, and consumer service industries, and made the value-added of the new immovable property in all enterprises eligible for VAT deductions. The tax burdens of all industries newly included in the trials were reduced as planned, while other industries already included in these trials and industries originally using VAT also saw a reduction in their tax burdens due to increased business VAT deductions. Over the year we reduced the tax burden on enterprises across all industries by 573.6 billion yuan.

We further expanded the scope of additional tax deductions for enterprises' spending on research and development; increased funding for high-technology enterprises; introduced policies on equity-based incentives for innovation and on deferred payment of individual income tax for research and development personnel who have become shareholders through their technology and innovation; and improved tax policies for technology business incubators. We abolished or suspended a number of government-managed funds and consolidated some of these funds, expanded the coverage of exemption from 18 kinds of administrative charges; and urged local governments to overhaul and regulate their administrative charges on enterprises, thereby lessening the financial burden on enterprises and individuals by 46 billion plus yuan.

Reasonable increases were made to government expenditures. The government deficit was appropriately increased primarily to make up for reduced government revenue resulting from reductions in taxes and fees, ensuring funding for government spending. We raised the ceiling for local government debt by 1.18 trillion yuan. Local government bonds issued to replace outstanding debt reached 4.9 trillion yuan. Adding in the 3.2 trillion yuan worth of local government bonds issued in 2015, the value of such bonds issued over the past two years totaled 8.1 trillion yuan. Over the course of the year, local governments have saved approximately 400 billion yuan in interest payments by issuing bonds.

Meanwhile, targeted policies and measures were implemented to address overcapacity, reduce excessive inventory, deleverage, lower costs, and bolster areas of weakness. In funding the resettling of workers laid off from the steel and coal industries as result of overcapacity cuts, we set up funds financed by the central government and promptly allocated appropriations from such funds as subsidies or rewards for restructuring industrial enterprises. We ensured subsidies were provided to address the issue of central government "zombie enterprises." We adjusted policies on deed transfer tax and business tax in the real estate industry with a view to boosting people's demand for housing for personal use and second homes and helping reduce commodity housing stock.

We developed clear policies on the swapping and cancellation of debt in debt-to-equity swaps to support market-based swapping of debt owed to banks for company shares. We introduced short-term reductions on social insurance premiums and overhauled guaranty funds relating to enterprises, thereby further lowering the costs of enterprises. We redoubled efforts to strengthen areas of weakness, considerably increased funding for poverty alleviation, and fully supported major tasks such as rebuilding in rundown urban areas and infrastructure development.

-- Working for progress in fiscal and tax reforms and legislation

We worked toward extending VAT to cover all goods and services. We continued the reform to apply ad valorem rates to all resource taxes, piloted the reform to introduce the water resource tax, and drove progress in legislation on an environmental protection tax. We developed measures for the management of non-tax government revenue. We issued guidelines on the reform to share fiscal authority and spending responsibilities between the central and local governments, making clear the requirements, the sharing principles, and the main content of the reform. We determined the appropriate ratio for sharing VAT revenue between the central and local governments following the application of VAT in all industries in order to ensure the stability currently enjoyed in the sharing of financial resources continues. We adjusted the methods for central government VAT rebates to local governments, and improved the revenue-sharing fiscal system. We issued and implemented fiscal policies on granting urban residency to people with rural household registration living in urban areas, and introduced related reward mechanisms.

We reformed and improved the system of central government transfer payments to local governments, cutting the number of items receiving special transfer payments from the central government to 94, and raising the proportion of general transfer payments against total transfer payments to 60.6 percent. We stepped up efforts to see that government budgets and final accounts are made available to the public, publishing for the first time a whole package of final accounts of central departments on http://www.gov.cn/and http://www.mof.gov.cn/index.htm and drawing up operating procedures for publicly releasing local budgets and final accounts.