China: How Can Revenue Reforms Contribute to Inclusive and Sustainable Growth?

31 Pages Posted: 14 Apr 2015

See all articles by W. Raphael Lam

W. Raphael Lam

International Monetary Fund (IMF)

Philippe Wingender

International Monetary Fund (IMF) - Fiscal Affairs Department

Date Written: March 2015

Abstract

Revenue reforms can contribute to more inclusive, green, and sustainable growth in China. Relative to OECD economies, fiscal policy in China is less redistributive. Options for promoting more inclusive growth include improving the progressivity of labor taxes (individual income tax and social security contributions), introducing a recurrent property tax, and finishing the transition to a comprehensive value-added tax. Higher environmental taxes, meanwhile, would promote more environment-friendly economy. These reforms could also significantly boost revenue, potentially by as much as 6½ percent of GDP. Such increases in revenue could help reduce the deficit, finance priority social and infrastructure spending, and offset cuts in other taxes. We illustrate how these revenue reforms could be part of a comprehensive fiscal package that achieves the needed consolidation in the (augmented) deficit and foster higher quality growth.

Keywords: Tax revenues, China, Tax reforms, Fiscal reforms, Inclusive growth, Tax systems, fiscal Policy, government debt, social security, taxes, local government, local governments, income tax, government finances, budget

JEL Classification: H00, H10, H20, H70, H60

Suggested Citation

Lam, W. Raphael and Wingender, Philippe, China: How Can Revenue Reforms Contribute to Inclusive and Sustainable Growth? (March 2015). IMF Working Paper No. 15/66. Available at SSRN: https://ssrn.com/abstract=2594150

W. Raphael Lam (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Philippe Wingender

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States
202-623-9831 (Phone)
202-623-4199 (Fax)

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