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Ma Jun:Does China’s Extant Resource Tax Lead to Regional Disparities of Fiscal Capacity?

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1) There is little link between resource tax and regional disparities in the terms of the tax revenues. First, the number of taxable items is limited and the rates are too low, constraining the range of taxation. Taxes are levied only on crude oil, natural gas, coal, non-metal, ferrous and non-ferrous ores, and salt. Other natural resources are not included. Table1 illustrates the top twenty provinces of resource taxes and their shares in total tax revenues. It is shown that since resource tax revenues are not significant in provincial tax revenue as a whole, they are not yet the main factors, which influence provincial disparities.

Table 1. Resource taxes in provincial total tax revenue in 2000

 

Province Resource Tax

(10 thousand yuan)

Total tax revenue

(10 thousand yuan)

Percentage

(%)

Heilongjiang

Liaoning

Shandong

Hebei

Shanxi

Sichuan

Xinjiang

Henan

Inner Mongolia

Anhui

Hubei

Shaanxi

Chongqing

Guangdong

Jiangsu

Yunnan

Jilin

Gansu

Guangxi

Jiangxi

123,511

79,070

60,959

47,591

50,715

37,619

30,595

24,347

20,413

18,335

15,296

13,046

10,476

9,778

9,773

9,237

9,023

8,487

7,797

7,416

3,762,350

3,970,796

6,071,992

3,510,966

1,807,988

3,627,315

1,493,207

3,652,530

1,455,618

2,296,215

3,056,729

1,786,456

1,359,393

12,608,837

8,156,618

4,260,914

1,856,168

983,347

1,784,763

1,419,387

3.283

1.991

1.00

1.355

2.805

1.037

2.047

0.667

1.402

0.798

0.500

0.303

0.771

0.775

0.198

0.166

0.861

0.631

0.369

0.225

Sources: ChinaStatistical Yearbook (2000)

Things changed a bit after 2011 because the new Regulations coming into effect. According to the new Regulations, crude oil and natural gas are levied 5-10% ad valorem resource taxes respectively. Although resource-rich provinces such as Qinghai, Xinjiang, Inner Mongolia, Shaanxi and Gansu benefited from this change(see table 2), we still couldn’t say resource-rich provinces take advantages from resource tax in terms of fiscal capability. 

Table 2. Resource taxes in provincial total tax revenue in 2011.

Province Resource Tax

(100 million yuan)

Total tax revenue

(100 millian yuan)

Percentage

(%)

Qinghai 14.91 119.85 12.44
Xinjiang 65.01 593.41 10.96
Inner Mongolia 56.81 985.69 5.76
Shaanxi 49.44 933.84 5.29
Gansu 14.36 284.04 5.06
Shanxi 38.76 872.88 4.44
Liaoning 68.12 1974.85 3.45
Heilongjiang 23.73 741.85 3.2
Hebei 32.77 1348.51 2.43
Jiangxi 18.66 777.09 2.4
Guizhou 11.95 518.14 2.3
Henan 26.59 1263.10 2.1
Tibet 0.81 45.83 1.77
Yunnan 14.08 881.95 1.6
Ningxia 2.74 177.13 1.55
shangdong 38.36 2603.13 1.47
Sichuan 21.84 1537.42 1.42
Guangxi 8.56 644.80 1.33
Anhui 14.52 1108.31 1.31

Sources: : China Statistical Yearbook (2012).

2) The present tax follows the principle of “universal tax with differentiation based on grades”. Taxable items and mining enterprises of major minerals are treated differently. Enterprises with better resource conditions are more highly taxed, while those of lesser conditions are taxed less. This obviously is not in favor of middle and western provinces with poor economic performance and better resource conditions.

3) In the terms of legislative power over resource taxes and government allocation of the tax revenues, the existing taxation does not help to bring closer the regional disparities.

Although local governments enjoy most of resource tax revenues, they have no power of legislation. This means that in allocating rents of resources, local governments are not able to transfer the revenues from consumers of resources by the means of taxation. As a local tax (except for offshore oil), whether resource tax can serve to balance regional economic disparities depends on where the revenues are spent. If they go back to local resource developing companies, they through promoting the growth of enterprises are likely to increase job opportunities, increase local GDP, and therefore offset the effect of regional disparities. However poor regions with relatively more resource tax revenues, are usually in short of local fiscal budget. The money is more likely to be used for government consumption than to balance regional disparities. With most of the resource tax in the control of local government, it is difficult for the central government to consider its use in a national context, particularly in transfer payment.

In general, since resource tax is a small item in the tax system inChina, it has never exceeded 1% in the total national revenues since it was enforced in 1984. It is neither a big share in provincial revenues, no more than 12.4%. On the other hand, the legislative power is central though it is a local tax. As a result, there is little chance for provinces with natural endowments to collect rents on natural resources through legislation. Therefore there is no evidence that resource taxes universally cause regional disparities of fiscal capacity, particularly in western federal systems where resource rich regions do not necessarily have stronger fiscal capacity than less endowed regions. This is in contradiction with the advocacy “to turn resource advantages of the West into economic advantages” in the program to developChina’s western regions.