1

Study on Tax Policies for the Development of

Ethnic Minority Regions in China

ZHANG Dongmei1

ABSTRACT

The preferential tax policies have been provided to ethnic minority regions (EMRs)2 since

People's Republic of China was founded. However, the economic development gap is still

significant between EMRs and other regions in China. The tax policies for the

development of EMRs are studied in this paper, including evolution, assessment, analysis

and outlook. In fact, it is difficult to get contribution rate of the tax policies to economic

development in EMRs with integrity and complexity. The current tax law and system

definitively impact on the tax policy effect. Against the backdrop of supply-side fiscal

reform, reform toward fair tax system is a more critical contributor than tax reduction to

supporting EMRs development, and protecting local right to tax revenues with laws and

regulations is more important than preferential tax treatment. In order to further narrow the

development gap between EMRs and other regions, preferential tax policies of lower tax

rate (and tax reduction and exemption) should continue to exist in the short and

mid-to-long run.

1. Research Questions and Literature Review

1.1 Research questions

Since the founding the P. R. China, various public policies have been formulated

by the central government to support the development of ethnic minority regions

(EMRs). One of the most important policies is tax policy, in particular preferential

tax policy. China’s fiscal reform has gone through three stages—the centralized

administration system 3 (tongshou tongzhi), the fiscal contracting system 4

(baoganzhi) and the tax assignment system 5 (fenshuizhi). As the reform

proceeded, tax policies to support EMRs development have also been adjusted

accordingly. Current tax policies to support the economic and social development

1 Professor, Economic School in Minzu University of China, Beijing, 100081, beckyzhangdm@163.com.

2 Ethnic minority autonomous refer to the areas of 5 ethnic minority autonomous regions,

30 ethnic minority autonomous prefectures, and 120 ethnic minority autonomous counties(Qi). Ethnic minority regions (EMRs) in this paper refer to 5 ethnic minority autonomous regions. 3 A highly centralized system, the central government was responsible for all the tax

collection and expenditure. 4 The system required each level of governments to contract with its subordinate level to

meet certain revenue and expenditure targets. 5 The system specifies how tax revenue is shared between central and local governments,

and that is system of tax distribution.

2

of EMRs mainly focus on two areas—the first is to support industrial

development from a market-oriented perspective by means of tax reduction and

exemptions to lower tax burdens, and the second is for the local government to

provide differentiated public goods compatible with the demands of EMRs by

accelerating resource tax reform based on local comparative advantages so as to

increase local tax revenues of EMRs. Of course, central government’s financial

transfer payment to sub-national governments is a straightforward and effective

way to realize equalization of basic public services. However in the long run, it is

important to strengthen the fiscal robustness of EMRs for them to pursue

self-sustained development and to improve public services provided by

governments of EMRs. Since 2015, China has focused on promoting supply-side

structural reform. Against the backdrop of fiscal reform with tax reduction as the

pivot, it is important to think about how central government’s tax policies should

be adjusted to support EMRs development. How effective are those policies?

Should the aim of the tax policies be redefined? To answer these questions, it is

necessary to sort out the tax policies aimed at supporting EMRs development

and conduct quantitative assessment and in-depth analysis of these policies.

Moreover, it is imperative to think about how to maximize the positive impact of

tax policies on EMRs development from the perspective of taxation system, tax

law and political system.

1.2 Brief review on literature

Overseas literature dedicated to studying on tax policies that support regional

development is extremely rare, and most of the time tax policies are formulated

in consistency with industrial policies or trade policies to realize development

goals. What is abundant is literature discussing the compatibility between tax

policies and development policies (Oxfam, 2000; P. Hoebink, 2001, 2004; L.

McLean Hilker, 2004; Maastricht, 2007). Taxation has both positive and negative

impact on economy, and therefore tax policy has great potential in influencing

economic development. Since it is very common for developing countries to

struggle with pressure regarding fiscal revenue and tax collection efficiency, the

coupling between tax policy implementation and development goals is worth

further in-depth studies (Francis Weyzig and Michiel Van Dijk, 2009; Satya P. Das,

2012).

In contrast, there is plenty of domestic literature on tax policies related to

regional development and some of it is aimed exclusively at studying preferential

tax policies for EMRs (D. M. ZHANG, 2007; J. J. LI et al, 2009, 2011; Y. Y. PIAO,

2011; T. HUANG, 2011; Y. J. QIAO et al, 2015; W. B. TANG, 2016; L. ZHANG et al,

2016). These papers have reached a basic consensus on the important role of

preferential tax policies in strengthening support to EMRs development and have

proposed innovative tax policies, legislative measures, etc. However, to fix the

deep-rooted problems regarding tax policies supporting EMRs development, it is

far from suffice to simply rely on the improvement of policies and rules on tax

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collection and administration. In fact, solutions should be found in taxation

system and tax laws to address issues related to distribution of local tax revenues

and to define roles of EMRs in industry growth, so as to promote the rapid and

sound development of EMRs.

2. Evolution of Tax Policies Supporting EMRs Development

Consistent with the history of China’s fiscal reform, the current paper divides the

evolution of tax policies supporting EMRs development into three stages: 1) the

period between 1949 and early years of reform and opening up; 2) the period

after reform and opening up and before the initiation of tax assignment system;

and 3) the period from the start of tax assignment reform till now.

2.1 From 1949 to 1979: Centralized fiscal administration

During this period, the country implemented a highly centralized mechanism of

planned economy, and accordingly the fiscal system was featured with power

centralization. To mitigate the concerns of ethnic minorities toward the new

governments at various levels, the central government adopted a series of tax

policies aimed at supporting EMRs development, as shown in Table 1.

Table 1 Major Tax Policies Supporting EMRs Development (1949-1979)

1950

To roll out centralized fiscal administration across the country

while allowing EMRs to implement the policy with certain degree

of autonomy and some regions to have autonomous tax

administration,.

1951

The Government Administrative Council gradually approved

border trade, allowing China’s border regions to trade with

countries such as North Korea, Russia, Mongolia, Pakistan,

Myanmar and Vietnam. The exchange of local goods by residents

living at border areas (mainly ethnic minorities) for daily

necessities was either exempt from tax or enjoyed lower tax rate.

1953-1

957

To restore agricultural production of EMRs, the central

government adopted a low tax policy for agricultural areas where

tax was calculated based on prescribed rate, certain tax was

reduced or exempted in accordance with law and tax burden

remained the same for increased production output.

Impoverished agricultural areas followed a policy of “less tax

reduction for areas stricken by mild disasters, more for those

stricken by heavy disasters, and all tax exempted for areas

suffering from catastrophic disasters”. Moreover, taxes for

agriculture and husbandry were all exempted, and pasture areas

enjoyed more favorable tax policies than agricultural areas and

cities. There were also policies on ethnic minority products to

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ensure the production and supply of industrial goods with strong

ethnic minority and regional features, multiple specifications,

complex techniques and small production volumes, so as to meet

certain special demands of ethnic minority residents. Such

policies covered planned supply of earmarked raw material,

favorable prices and tax reduction and exemption.

1958-1

962

A number of mainstay machinery manufacturing enterprises were

relocated by the government to the north-western and

south-western EMRs, and initiated many key projects in Inner

Mongolia, Xinjiang, Gansu, Ningxia and other EMRs. These projects

covered the production of steel and nonferrous metal,

construction of large hydro-power infrastructure and construction

of production bases of energy such as coal. Accordingly, tax

policies were formulated to support industrial development of

those EMRs.

1963

Ministry of Commerce and Ministry of Finance released the Joint

Notice on Three Preferential Treatment Measures for Ethnic

Trading Enterprises in Remote Mountain Areas and Remote Pasture

Areas, which specified that 17 counties of Guangxi, 31 Counties of

Yunnan, 45 Counties of Sichuan, 22 Counties of Guizhou, 31

Counties of Qinghai and 13 Counties of Gansu could enjoy

favorable treatment. All of the three measures included in them

preferential tax policies and offered multiple favorable policies on

the production and supply of goods for EMRs, for example

preferential policy on supply of daily necessities of ethnic minority

residents, policy on national reserve of Bianxiao Tea 6 ,

administration and preferential policy on gold and silver

ornaments exclusively for ethnic minority residents, policy on the

production of goods exclusively for ethnic minority residents and

favorable tax policy for designated producers of goods that were

included in the catalog of ethnic minority goods (of provinces,

districts and cities) and that were within prescribed quota.

1973

Report on Strengthening the Production and Supply of Goods

Exclusive for Ethnic Minorities by the Ministry of Light Industry

and the Ministry of Commerce was approved by the State Council,

in which preferential tax policies were included.

Source: summarized by author

During this period, tax policies supporting EMRs development were mainly

focused on tax reduction and exemption for the production and trade of daily

6 Bianxiao Tea, commonly known brick tea, is sold exclusively in the border regions, plateau

and pasture areas in China. The CPC and the government classify it as daily necessity of ethnic minority residents to ensure its production and supply.

5

necessities of EMRs and ethnic minority residents. The Program for the

Implementation of Regional Ethnic Autonomy of the People's Republic of China in

1952 and the Temporary Methods on Fiscal Administration of Ethnic Autonomous

Regions in 1958 laid the legal foundation for EMRs’ fiscal system. The Report on

Improving Fiscal System of Ethnic Autonomous Regions and Rules on Improving

Fiscal System of Ethnic Autonomous Regions (Draft) in 1963 specified the fiscal

and budget administration methods for ethnic autonomous regions, which

empowered ethnic autonomous regions with tax administration power to certain

extent.

2.2 From 1979 to 1993: Fiscal contracting system

During this period, fiscal administration was directed toward the fiscal

contracting system. In compliance with regional development strategies, the

central government provided EMRs with certain subsidies and continued to

implement tax policies supporting EMRs development, as shown in Table 2.

Table 2 Major Tax Policies Supporting EMRs Development (1979-1993)

1980

A fiscal system started to be rolled out across the country where

responsibilities of tax collection and revenue expenditure were

divided between central and sub-national governments and among

different levels of local governments, and fiscal contracting was

carried out across the country. Certain special rules concerning

EMRs remained unchanged, and the central government specified

that governments of eight ethnic regions (i.e. five Ethnic Minority

Autonomous Regions together with Yunan, Guizhou and Qinghai)

could keep all the tax revenues and enjoy subsidy in case of

shortfall. The subsidy would remain unchanged for 5 years.

1982

Notice on Increasing the Procurement Price of Raw Material of

Bianxiao Tea by the Ministry of Commerce, the State Administration

of Commodity Prices and the State Ethnic Affairs Commission

specified to increase the standard and procurement prices of six

types of raw materials of Bianxiao Tea by more than 10% and to

lower tax by 20%.

1984

Temporary Methods on Administration of Small Border Trade

specified that small border trade would be administered by the

people’s governments of relevant provinces and autonomous

regions, and that border trade among residents should not exceed

certain transaction amounts within which customs, product tax and

VAT would be exempted.

1985

Report of Ministry of Commerce on Issues Regarding Promoting

Commerce of Ethnic Minority Regions specified necessary support to

commercial activities of ethnic minorities, for example to continue

the policies on tax reduction and exemption for commercial

enterprises of counties enjoying the three preferential treatment

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measures, to promote the production of ethnic minority goods, etc.

1989

Request for Instructions on Issues Regarding Policies on Poverty

Alleviation of Ethnic Minority Regions by the State Ethnic Affairs

Commission and the Leading Group of State Council on Economic

Development of Impoverished Regions rolled out favorable policies

on tax and fees to promote the growth of advantageous industries.

1989

Joint Notice on Helping Ethnic Minority Regions to Develop and

Exploit Geological and Mineral Resources by the Ministry of Geology

and Mineral Resources and the State Ethnic Affairs Commission

specified measures to help EMRs to accelerate the development and

exploitation of geological and mineral resources and also provided

relevant favorable tax treatments.

1991

Notice to Release the list of Enterprises within Textile Industry

Designated to Produce Ethnic Products by the State Ethnic Affairs

Commission, the State Administration of Taxation, the People’s Bank

of China and the Ministry of Textile Industry designated 500

enterprises within the textile (silk) industry to produce ethnic

products, and those enterprises could enjoy tax reduction and

exemption policies and favorable loan policies.

1992

Notice on Issues Regarding Foreign-Related Tax Policies on

Opening-up Border, Coastal and Inland Provincial Capitals and Cities

along the Yangtze River by the State Administration of Taxation

specified that foreign producers in 18 border, coastal and inland

provincial capitals as well as 5 cities along the Yangtze River could

enjoy a reduced enterprise income tax rate of 24%. Foreign

producers engaging in prescribed business could, with approval of

the State Administration of Taxation, have their enterprise income

tax rate lowered by 15%.

Source: summarized by author

Tax policies in this period kept the tax reduction and exemption of the previous

period that aimed at ensuring the production, livelihood, trade and poverty

alleviation of EMRs, apart from which, there were also fiscal revenue policies to

compensate EMRs under the regional development strategy of the country and

tax policies to boost the opening-up initiative of EMRs in non-coastal areas. The

year 1984 witnessed the approval and implementation of the Law of the People’s

Republic of China on Regional Ethnic Autonomy in which numerous articles

specified that EMRs were entitled with preferential treatment, support, subsidies

and grants from superior authorities. During this period, legal and institutional

foundation was set up for the EMRs to perform autonomous fiscal

administration.

2.3 From 1994 till now: Tax assignment system

7

The reform toward the tax assignment system in 1994 was a milestone in the

evolution of China’s fiscal system. The exploration on public fiscal system started

in 1998. The taxation system was reformed across the board under the principle

of “unified tax code, fair tax burdens, streamlined tax system and reasonable

division of power”. During this period, a significant feature of fiscal policy

regarding EMRs development was the enhanced transfer of payment from the

central government to EMRs, and relevant tax policies were primarily focused on

bringing benefits to EMRs, as shown in Table 3.

Table 3 Major Tax Policies Supporting EMRs Development (1994 till now)

1994

The State Council decided in the National Eight-Seven Poverty

Alleviation Plan to dedicate human and financial resources from

1994 to 2000 to provide adequate food and clothing for 80

million impoverished people in rural China. Newly established

enterprises in the old revolutionary areas, ethnic minority

autonomous areas, inland border areas and impoverished areas

recognized by the government could enjoy full or partial income

tax rebate within 3 years after tax payment was made.

1994

Preferential tax policies were formulated for the pilot of EMRs

reform and opening-up, the pilot of rural reform and the zone of

high-and-new technology development. HulunBuir and Wuhai of

Inner Mongolia, the Yanbian Korean Autonomous Prefecture, the

Qiandongnan Miao and Dong Autonomous Prefecture and the Ili

Kazak Autonomous Prefecture of Xinjiang

Uygur Autonomous Region were among the first to join the pilot

of EMRs reform and opening-up.

1996-1

997

The State Council formulated border trade policies and released

the Response on Issues Regarding Ethnic Trade and Production of

Ethnic Goods for the Ninth Five-Year-Plan Period, which was

aimed at implementing preferential economic policies

concerning interest rate for loan of designated enterprises, fiscal

discount and taxation.

1998

The Notice on Issues Regarding Taxation of Ethnic Trade

Enterprises by the Ministry of Finance and the State

Administration of Taxation specified on the reduction,

exemption and rebate of VAT and enterprise income tax.

Favorable tax policies were formulated for ethnic trade counties,

ethnic trade corporations at provincial and prefecture level and

enterprises designated to produce ethnic goods during the ninth

five-year-plan period, and preferential tax treatments were also

covered in the Notice on Supplementary Rules to Further Promote

Border Trade.

1999

The State Administration of Taxation released the Notice on

Applying a Reduced 15% Tax Rate for Enterprise income tax to

Foreign Invested Enterprises in Mid-Western Regions for Three

8

Years.

2001

State Administration of Taxation released the Notice on Issues

Regarding VAT Exemption for Subsidies to Programs of Returning

Farmland to Forest and Grassland.

2001-2

003

The Notice on Issues Regarding Preferential Tax Policies for the

Initiative to Develop the Western Regions by the Ministry of

Finance, the State Administration of Taxation and the General

Administration of Customs specified that domestic and foreign

invested enterprises engaging in industries encouraged by the

government in the western regions of China could enjoy a

reduced 15% enterprise income tax rate from 2001 to 2010.

Upon the fourth year of the Initiative for Development of

Western Regions, the central government enhanced support to

western regions in terms of public investment, tax policies and

transfer of payment, for example formulating favorable tax

policies on the construction of Qinghai-Tibet railway and the

West-East natural gas transmission project.

2006

The Notice on Continuing to Implement the Preferential Policies

on Ethnic Trade and Production of Ethnic Products by the State

Ethnic Affairs Commission stipulated that favorable tax policies

would continue. The Notice on Continuing to Implement

Preferential VAT Policies for Goods Sold by Ethnic Trade

Enterprises and the Bianxiao Tea Produced and Distributed by

Government-Designated Enterprises and Distributors by the

Ministry of Finance and the State Administration of Taxation

specified that from 2006 to 2008, VAT was exempted for goods

(excluding oil and tobacco) produced by ethnic trade enterprises

at/below country level in ethnic trade counties and sold by

supply and marketing cooperatives as well as for Bianxiao Tea

produced by government-designated enterprises and sold by

relevant distributors.

2006

The Ministry of Finance and the State Administration of

Taxation released the Notice on Issues Regarding Changes to the

Catalog of Items Applicable to the Preferential Tax Policies on the

Western Region Development Initiative.

2007-2

008

The Enterprise income tax Law and the Tax Policies Supporting

Development of Cultural Industry contained tax policies

dedicated to ethnic autonomous regions and cultural industries

of ethnic minorities.

2011

The Notice on Preferential Income Tax Policies for

Newly-Established Enterprises in Areas with Financial Difficulties

of Xinjiang specified that from 2010 to 2020, newly-established

enterprises in areas with financial difficulties of Xinjiang could

enjoy favorable enterprise income tax treatment provided that

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they were included in the Catalog of Favorable Income Tax

Treatment for Enterprises Engaging in Encouraged Industries in

Areas with Financial Difficulties of Xinjiang.

2011

The State Council released the Opinions on Supporting the

Construction of Kashgar and Horgos Economic Development Zones

which specified relevant fiscal and tax policies.

2011

The Notice on Continuing to Implement the VAT Policies on

Bianxiao Tea by the Ministry of Finance and the State

Administration of Taxation specified that Bianxiao Teas was

exempted from VAT for from 2011 to 2015.

2012

Fiscal policies promoted and implemented by the State Ethnic

Affairs Commission included the Notice on Issues Regarding

Taxation of Ethnic Trade Enterprises, the Preferential Policies on

Ethic Trade and Production of Ethnic Goods, the Initiative to

Develop Border Regions and to Enrich Residents of Border Areas,

the Preferential VAT Policies for Goods Sold by Ethnic Trade

Enterprises and for Bianxiao Tea Produced and Distributed by

Government-Designated Enterprises and Distributors, etc.

2014

The Ministry of Finance and the State Administration of

Taxation formulated respectively the Notice on Adjusting

Resource Tax for Crude Oil and Natural Gas and the Reform of

Resource Tax on Coal.

2015

The Catalog of Value-Added Tax Preferences for Products and

Labor Services Involving the Comprehensive Utilization of

Resources by the Ministry of Finance specified on the reform and

adjustment of resource tax.

2015

The Ministry of Finance and the State Administration of

Taxation released the Notice on the Application VAT Refund

(Exemption) Policies to Goods Entering the China-Kazakhstan

Horgos International Border Cooperation Center.

2016

The Ministry of Finance, the State Administration of Taxation

and the Ministry of Water Resources released the Temporary

Methods on Pilots of Water Resource Tax Reform (for the pilot in

Hebei Province).

Source: summarized by author

An important feature of tax policies during this period, apart from those to

support EMRs development on areas such as poverty alleviation, ethnic goods

and ethnic trade, is that a lot of them were formulated to bring benefits to EMRs

in such forms as tax policies on the Western Region Development Initiative and

on resource tax reform and improvement. Another critical feature is the focus of

tax policies on promoting opening-up of EMRs.

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3. Effectiveness of Tax Policies Supporting EMRs Development

3.1 Preferential tax policies alleviate tax burdens of EMRs

Under the unified tax system and tax code framework, measurements of macro

tax burden (MTB) of EMRs against the national average tend to show the direct

impact of preferential tax policies on EMRs. Domestic studies suggest that less

developed areas, particularly community-level governments of those areas, have

higher proportion of non-tax revenue to total fiscal revenue in their efforts to

raise fiscal revenue. Because non-tax revenue also adds to the “tax burden” of

local enterprises and residents, the current paper measures and compares macro

tax burdens of EMRs from different perspectives.

3.1.1 Overall MTB: EMRs vs. sub-national localities

Overall MTB in this section refers to the proportion of a region’s total fiscal

revenue to GDP of that region7. A comparison of MTB between EMRs and

sub-national localities of the country8 based on data from 1952 to 2005 tends to

show the overall MTB of EMRs, as illustrated in Figure 1.

Figure 1 Comparison of Overall MTB between EMRs and

Sub-National Localities Average (1952-2015)

Source of data: See Appendix 1

7 This measurement is used by the IMF to calculate tax burden.

8 Sub-national localities of the country refer to 4 municipalities, 5 autonomous regions, and

22 provinces.

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

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Inner Mongolia Guangxi Ningxia

Tibet Xinjiang EMRs

Sub-National Localities

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The overall MTB of the five EMRs fluctuates around 10% while the national

average moves around 20%. The average MTB of EMRs is lower than that of

national average by 10 percentage points (9.88%) with the largest gap appearing

in 1973 (18.44%) and the smallest in 2001 (0.57%). This suggests that tax

policies supporting EMRs development have reduced EMRs tax burdens

significantly, facilitating EMRs industrial development.

3.1.2 Provincial-level MTB: EMRs vs. sub-national localities

The tax assignment reform in 1994 divides inter-governmental revenues into

central fiscal revenue and local fiscal revenue. This section discusses the tax

burden imposed by the local governments of EMRs, and in this context, the MTB

refers to the proportion of a region’s general budgetary revenues to the region’s

GDP, as illustrated in Figure 2.

Figure 2 Comparison of Provincial MTB between EMRs and

Sub-National Localities Average (1995-2015)

Data source: See Appendix 2.

The average provincial MTB of EMRs is basically the same with that of national

average. The former was higher than the latter by 0.3% in 1998 and lower by

1.51% in 2015. Since 2001, the sub-national localities average has been higher

than EMR’s average by 1 percentage point (0.64%). Generally speaking, the MTB

of EMRs under provincial level has been lower than national average since 2001,

suggesting that local governments of EMRs dealt with relatively small tax

burdens compared with local governments of the other regions.

3.1.3 Narrow MTB: EMRs vs. sub-national localities

This paper also takes into account the narrow MTB, i.e. the proportion of tax

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

Inner Mongolia

Guangxi

Ningxia

Tibet

Xinjiang

EMRs

Sub-National Localities

12

revenue to GDP. Statistics from 2000 to 2015 are used because of data availability,

as shown in Figure 3.

Figure 3 Comparison of Narrow MTB between EMRs and

Sub-National Localities Average (2000-2015)

Source of Data: See Appendix 3.

As shown in Figure 3, narrow MTB of EMRs was lower than national average

from 2000 to 2015 with the smallest gap in 2000 (2.6%) and the largest in 2014

(5.86%). Moreover, EMRs had lower proportion of tax revenue of central

government to local GDP compared with sub-national localities average and their

tax burden coming from the central level was not heavier than sub-national

localities average. The proportion of central-level tax revenue to total tax revenue

of EMRs ranges from 44.92% to 59.51%, however the national average ranges

from 51.61% to 64.06%.

Comparison of data from different perspectives shows that EMRs has smaller

MTB than other localities of the country, meaning that the direct impact of

preferential tax policies lies in the mitigation of EMR tax burdens.

3.2 Differences in tax structure before and after resource tax reform suggest that preferential tax policies contribute to EMRs’ fiscal revenue

Currently there are 17 types of taxes in China and they are further classified into

5 categories: 1) turnover taxes including VAT, consumption tax and customs duty

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Tax Burden in EMRs

Tax Revenue of Central Government/GDP in EMRs

Tax Burden in Sub-National Localities

Tax Revenue of Central Government/GDP in Sub-National Localities

13

(business tax has been replaced with VAT); 2) income taxes including enterprise

income tax and individual income tax; 3) resource taxes including resource tax,

urban land use tax and farm land occupation tax; 4) property taxes such as real

estate tax, vehicles and boats operation tax and tax on contract; and 5)

behavioral taxes including stamp tax, city maintenance and construction tax, land

appreciation tax9, vehicle purchase tax, tonnage tax and tobacco tax.

China adopts a composite tax system with two pillars—turnover taxes and

income tax. The division of tax revenues between the central and the provincial

governments became very clear in 1994, but there were no specified or legally

prescribed rules regarding how the sub-national tax revenues and the portion of

shared tax revenues belonging to local governments should be distributed among

various levels of local governments. Therefore tax revenue in this paper also

refers to the sub-national tax revenue of the five autonomous regions, and the

local tax structure is analyzed to study the implication of resource tax on the

growth of EMRs’ fiscal revenue. 10See Table 4.

Table 4 Comparison of Sub-National Tax Revenue Structure

Between EMRs and Sub-National Localities (%)

Five Autonomous Regions

Domestic

VAT

Business

Tax

Enterprise

Income Tax

Personal

Income Tax

Resource

Tax

2000 20.74 30.09 13.74 9.45 2.36

2001 19.46 28.01 22.13 11.43 2.30

2002 18.20 29.34 8.59 6.98 2.09

2003 18.57 31.31 6.27 5.34 1.83

2004 20.81 34.08 6.35 5.63 1.84

2005 20.79 31.78 7.24 5.42 2.24

2006 20.66 29.57 7.71 4.80 2.87

2007 24.30 34.81 10.10 6.19 3.42

2008 23.30 33.13 11.21 5.69 3.33

2009 18.61 35.94 11.10 5.55 3.49

2010 17.40 36.83 12.18 5.57 4.39

2011 16.50 34.92 14.32 5.77 5.63

2012 14.08 33.44 13.39 4.84 5.35

2013 13.90 34.10 11.59 4.19 4.99

2014 14.85 31.35 10.33 3.93 5.05

2015 14.10 29.44 9.56 4.29 5.74

9 Land appreciation tax is sometimes categorized as resource tax or property tax by some

textbooks. 10

In terms of local-level tax revenue structure, analysis is focused on turnover tax, income tax and resource tax (as tax type), which also provides data for further studies on major tax types of EMRs and their industry development and trends.

14

Sub-National Localities

Domestic

VAT

Business

Tax

Enterprise

Income Tax

Personal

Income Tax

Resource

Tax

2000 22.41 31.28 19.28 9.81 1.22

2001 21.12 28.68 25.32 11.11 1.04

2002 23.87 34.94 16.16 9.21 1.14

2003 24.88 37.51 13.49 7.68 1.13

2004 24.26 37.73 14.41 7.54 1.07

2005 23.98 36.77 15.17 7.50 1.27

2006 23.67 36.48 15.34 7.20 1.52

2007 21.96 35.90 16.94 7.16 1.47

2008 21.03 34.27 18.16 6.89 1.40

2009 19.79 37.21 15.40 6.63 1.42

2010 18.34 37.36 16.35 6.57 1.42

2011 16.48 36.25 17.27 6.50 1.60

2012 14.55 32.99 15.12 4.94 1.82

2013 15.67 31.82 14.15 4.88 1.79

2014 16.66 30.10 14.31 5.02 1.77

2015 16.31 30.73 14.46 5.53 1.60

Source of data: Calculated based on statistics from the China Taxation Yearbook from 2000 to

2016. See Appendix 4 about the tax revenue structure of Inner Mongolia, Guangxi, Ningxia,

Tibet and Xinjiang.

As shown in the above table, the proportion of turnover tax revenue to

sub-national tax revenue and the proportion of income tax basically share the

same evolution path from 2000 to 2015. However the proportion of resource tax

demonstrates a strong upward trend, as shown by the fact that the figure of

national average varies by less than 0.5 percentage points yet that of EMRs shows

apparent fluctuation, increasing from 2.61% in 1999 to 5.74% in 2015. To be

more specific, in terms of the proportion of resource tax to total tax revenue,

Inner Mongolia, Ningxia and Xinjiang autonomous regions experience significant

growth, Guangxi, a relatively mild increase and Tibet, a decrease. As resource tax

is gradually applied more broadly, for example in the Hebei pilot program in

2016, Guangxi is expected to see more contribution of resource tax to local tax

revenue (for more data see Appendix 4). Therefore, it is concluded that resource

tax reform has contributed a lot to the increase of EMRs’ local fiscal revenue.

4. Analysis on the Root Causes of Problems Concerning Tax

Policies Supporting EMRs Development

The ultimate goal of tax policies supporting EMRs development is to enhance the

capability of EMRs to pursue self-sustained development. In fact, the major

players to promote regional development are governments, enterprises and

15

households. It requires complex and systemic efforts to build self-sustained

development capability and the prosperity of enterprises and households

depends on industrial development in a competitive market where specific tax

policies are implemented. Therefore, from a market perspective, tax policy is

mainly dedicated to enhancing industrial competitiveness of EMRs, and from a

government perspective, tax policy is aimed at strengthening the public service

capacity of EMRs’ governments. As a result, it is important to analyze EMRs’

industries from a taxation perspective and to study on local tax system.

4.1 Current tax code and EMRs’ economic conditions enhance the effectiveness of tax policies

4.1.1 Rules of current tax code on tax type administration are more likely to

cause divergence between tax source and tax revenue in EMRs

The fact is that enterprises are more likely to register and reside in economically

developed areas, which is particularly the case for headquarters. Rules of China’s

current tax code on place of tax payment lead to the flow of most tax revenues to

developed areas, and this is typically the case to enterprises whose branches are

located in different provinces, municipalities directly administrated by the State

Council and autonomous regions.

First, about VAT which is the most important part of turnover tax. Current rules

concerning VAT are the Temporary Rules on Value-Added Tax in 2008 (Directive

No. 538 of the State Council) and the Notice on Implementing the Pilot Program of

Replacing Business Tax with Value-Added Tax in an All-round Manner by the

Ministry of Finance and the State Administration of Taxation. Concerning the

place of VAT payment, it is specified in the latest tax rules that: “1) Business

operator with fixed premise should declare tax to the competent tax authority of

the place where the institution is located or the individual resides. Head office

and branch of the same business operator, if not located in the same county (or

city), should declare tax to local competent tax authorities at places where they

are located respectively. With the approval of the Ministry of Finance and the

State Administration of Taxation or public finance and tax authorities authorized

by MOF or SAT, the head office may declare consolidated tax to the competent tax

authority at the place where the head office is located; and 2) Business operator

with fixed premise that sell goods or provide labor service at counties (or cities)

other than the place where it is located should apply to the competent tax

authority of the place where it is located for Certification of Tax Administration

for Outbound Business Activities and declare tax to the same authority; the

abovementioned business operator, if without the certification, should declare

tax to the tax authority of the place where the sale or labor service occurs, and if

tax is not declared, tax should be collected by the tax authority of the place where

the business operator is located.” However, tax code concerning place of business

tax payment prior to 2015 specified that “Taxpayer who provides taxable labor

16

service should declare tax to the competent tax authority of the place where the

taxpayer is located or the individual resides; taxpayer who provides labor service

in construction industry and other taxable labor service specified by the fiscal

and tax authorities of the State Council should declare tax to the competent tax

authority of the place where the service is provided; and taxpayer who sells or

rents real estate should declare tax at the place where the estate is located.

Second, about enterprise income tax which is the most important part of direct

tax. In and prior to 2012, enterprise income tax is a major part of the

consolidated tax of head office and branches. In 2012, the State Administration of

Taxation released the Temporary Methods on Administration of Collection of

Enterprise income tax in Consolidated Taxation on Cross-Regional Business

Operation, in which it is stipulated that income tax of institutions whose head

office and branches are located in different provinces or cities should be collected

under the principle of “unitary calculation, multi-tiered administration,

pre-payment of tax at place of business, consolidated settlement and

coordination among fiscal authorities”, and as a result, horizontal distribution of

regional taxes became more fair. Although it is specified in the tax code that

“otherwise specified by the State Council, an enterprise should not pay income

tax in consolidation with other enterprises”, enterprises with branches can still

choose place of tax payment by using legal person qualification and via

secondary branch.

In addition, about consumption tax that is not collected at local level. Tax return

of central government to local governments is divided into consumption tax

return and the part for consumption tax reform, and consumption tax of some

consuming goods is collected during retail stage. As a result, tax revenue that

should be attributed to EMRs is collected at economically developed areas, for

example, the consumption tax of refined oil.

Various studies have discussed the unfairness in the horizontal distribution of

tax revenues in China including those of LIU Yi et al (2009) on distribution of VAT

and business tax revenues, those of HUANG Xialan (2009) on divergence of tax

sources among regions and LIU Jinshan (2014) on deviation of turnover tax and

regional economic development. Imbalances in the horizontal distribution of tax

revenues under the current tax code highlight the impact of preferential tax

policies on EMRs. What truly reflects the effectiveness of favorable tax treatment

is the mitigation of tax burdens of EMRs under a fair distribution framework of

tax revenues among regions. However, it is not suffice to solve the problem

completely by simply adjusting tax code concerning place of tax payment and tax

policies.

4.1.2 Economic conditions of EMRs make them dependent on resource-intensive industries in the short term

EMRs are located in remote areas with complex landscape and diverse climate

17

conditions because of historical and geographic reasons, which endows EMRs

with rich ecological and environmental resources. Currently, EMRs have a total

land area of 6.23 million square kilometers, accounting for 63.89% of the

national total. The area of grassland takes up 75.07% of the country’s total; the

pasturing area and the semi-farmland-semi-pasturing land, 75%; forest volume,

46.57%; and water resource reserve, 65.93%. The major mineral resources of

EMRs are coal, iron ore, phosphate ore and sylvine which account for 37.1%,

24.4%, 40.7% and 95.9% of national total respectively 11 . Inner Mongolia

abounds with more than 60 kinds of underground minerals, Xinjiang has 118

kinds of minerals and Ningxia nearly 50 kinds. Guangxi has one of the country’s

largest reserves of underground rare metals, and Tibet has more than 40 kinds of

minerals.

However, economic conditions mean that resource-intensive industries are the

largest component of EMRs’ industrial structure. Resource tax reform has, to

some extent, increased local fiscal revenue of EMRs. But low-tech

resource-intensive industries with poor added-value are mostly in the lower end

of the industrial chain, and that explains why resource tax is the largest

contributor to tax revenue. The non-renewable and gradual depletion of

resources mean that the contribution of resource tax is not sustainable. In order

to keep the proportion of resource tax revenue to EMRs’ fiscal revenue, resource

tax collection has to reach out to more areas. In fact, pilot on water resource tax

was already started in Hebei province in 2016.

Tax policy determines tax structure to some extent, and may further influence

regional economic development through economic growth determinants.

Overseas studies on the relationship between tax structure and economic growth

have not reached any consensus (Ganghof, 2006; Cnossen, 2012; Tiwari and

Mutascu, 2014). In particular, China is faced with more severe problems such as

the incompatibility between tax structure and economic structure (Guo Jing, et al,

2015). For the government to administer taxation by law (LI Fei, 2014), it is

important to implement structural tax reduction policies (Xu Shanda, 2017)and

to analyze the relationship between EMRs’ tax structure and social and economic

development from the perspective of tax incidence.

4.2 Tax policies supporting EMRs development should be more compatible with development goals

4.2.1 Competition of local governments’ tax policies mitigates tax

preferences on EMRs

Promotion of Chinese officials under the current political system leads to heavy

11 Department of Economic Development of State Ethnic Affairs Commission and the Department of Comprehensive Statistics of the National Economy of National Bureau of Statistics. China’s Ethnic Statistical Yearbook 2007. The Ethnic Publishing House, 2008: p 327.

18

competition among local governments. All the 31 provincial governments exert

themselves to excel at public service provision, human resource development

and tax revenue growth. Therefore, the effectiveness of tax reduction and

exemption for local governments of EMRs is very limited, if any. For example, the

Article 34 of the Law on Regional Ethnic Autonomy specifies that "autonomous

authorities of Ethnic Autonomous Regions, while implementing national tax code,

may reduce or exempt taxes on those items that belong to local fiscal revenue

and should be treated favorably and encouraged with tax-related means, apart

from items on which taxes are reduced or exempted with approval of the central

government". In Article 29 of the Law on Enterprise Income Tax, it is stated that

“autonomous authority of ethnic autonomous locality may decide to reduce or

exempt certain portion of income tax paid by local enterprises given that the

portion is shared by the autonomous ethnic locality”. Non-ethnic regions may

also provide preferential tax treatment within its authority, which mitigates the

effectiveness of local preferential tax treatment of EMRs. Such favorable policies

include those on tax base (such as tax remission, losses offset with profits and

exemption of fees), on tax amount (such as investment tax credit and direct tax

reduction and exemption) and on time of tax payment (such as tax deferral and

accelerated depreciation). As a result, the more effective favorable tax policies

are those coming from the central government, for example the tax reduction and

exemption policies dedicated to supporting EMRs prior to 1994 and the

preferential tax policies for the Western Region Development Initiative of EMRs

that covered wide areas and brought great benefits to the public.

4.2.2 Building on major tax types of EMRs based on regional industrial

advantages to improve fiscal capacity

It can be drawn from Figure 1 that turnover tax and income tax are the primary

pillars of local tax revenues of EMRs. From 2000 to 2015, the total revenue of VAT,

business tax, enterprise income tax and individual income tax took up more than

57% of sub-national tax revenue of EMRs12, which demonstrated the same trend

with that of the national average (65%). This means that the other 11 tax types

accounted for less than 50% of local tax revenue. Turnover tax and income tax

are regarded as the best indicators of industrial development status of EMRs.

Under the current tax system, there is still a long and difficult way to go for

resource taxes (including resource tax, urban land use tax and farmland use tax,

property taxes (such as real estate tax, vehicles and vessels tax and deed tax) and

behavioral taxes (including fixed asset investment orientation regulation tax,

stamp tax, urban maintenance and construction tax, land appreciation tax) 13to

become major tax types in EMRs14. In the short and long term, to increase local

12

Since the replacement of business tax with VAT in 2016, the central government and the local governments each get 50%. 13

Tobacco tax is also a part of local taxes. 14

Some developed countries make property tax the pillar tax type in local tax structures, some have income tax as the pillar and some adopt a dual-pillar structure based on a

19

fiscal revenue of EMRs, the most fundamental solution lies in the development of

EMRs’ advantageous industries, and the most direct and effective tax policy is the

increase of turnover tax and income tax. And this leads to the issue in the first

place—reduction of tax burdens.

5. Improving Tax System and Policies Supporting EMRs

Development

It is pointed out in the Third Plenary Session of the 18th CPC Central Committee

that we should “improve legislation, clarify government responsibilities, reform

tax system, stabilize tax burden, promote transparent budget, enhance efficiency

and build a modern fiscal system that mobilizes the initiative of the central and

local governments”. Improving tax system is the “root” and “key” to realize the

goals of tax policies. The general goal of tax policies supporting EMRs

development is to build the capacity of EMRs to pursue self-sustained

development. It is important to adopt measures strongly compatible with policy

goals, and this requires a thorough study on the formulation of China’s tax

policies and rules, for example on how tax rules are made and who has power

over tax collection and administration. Such a topic goes beyond economic or

fiscal area and reaches out to the political world.

5.1 Tax reform toward fair distribution of local tax revenues

The Legislation Law of China specifies that basic tax system covering creation of

new tax type, determination of tax rate and tax collection and administration

should be governed by law, and that the power of tax code formulation and tax

collection and administration resides in the National People’s Congress and its

Standing Committee. A fair tax system not only calls for rules that ensure the role

of taxation in income redistribution, but also requires fair representation and

democratic participation of tax experts, taxpayers and government officials in the

formulation of tax rules and regulations. For preferential tax policies on less

developed areas to truly reduce their tax burdens, the right to tax revenues of the

localities should be assured in the design of tax rules.

5.2 Lower tax rate promoting industrial development of EMRs

Compared with the favorable tax policies for special economic zones, coastal

development zones and economic and technological development zones, it is a

more righteous undertaking of the government to provide preferential tax

treatment to less developed EMRs that receive special support and incentives

from the country. Compared with the efforts of the central government to realize

public services equalization of EMRs by large amount of financial transfer

payment, it would be more effective to promote social and economic

combination of both.

20

development of EMRs by providing preferential treatment for EMRs at central

level taxation, by promoting industrial development of EMRs, by increasing local

fiscal revenue of EMRs and by offering local public goods that meet the

differentiated demands of ethnic minorities.

In short, against the backdrop of supply-side fiscal reform, reform toward fair tax

system is a more critical contributor than tax reduction to supporting EMRs

development, and protecting local right to tax revenues with laws and

regulations is more important than preferential tax treatment. In order to further

narrow the development gap between EMRs and other regions, preferential tax

policies of lower tax rate (and tax reduction and exemption) should continue to

exist in the short and mid-to-long run.

Appendix

Appendix 1

Comparison of Overall MTB between EMRs and

Sub-National Localities Average (1952-2015) (%)

Inner

Mongolia Guangxi Ningxia Tibet Xingjiang EMRs

Sub-National

Localities

1952 10.97 17.08 16.01 1.96 9.30 12.69 25.62

1953 5.56 18.37 12.94 2.22 13.15 11.73 25.88

1954 9.51 20.09 12.36 2.24 14.13 13.86 28.54

1955 12.06 18.73 12.91 2.12 14.06 14.59 27.39

1956 11.22 16.47 11.70 3.90 14.30 13.39 27.26

1957 14.76 13.82 14.22 8.92 15.40 14.41 28.39

1958 15.22 18.99 17.55 2.18 19.90 17.32 29.05

1959 19.65 23.51 21.05 12.59 25.31 22.07 33.85

1960 24.59 23.01 21.81 39.85 25.24 24.60 39.28

1961 19.62 13.88 18.85 21.09 16.08 16.86 29.19

1962 13.37 14.25 9.76 12.36 16.05 14.08 27.28

1963 13.21 14.74 10.91 6.42 18.92 14.72 27.75

1964 13.28 15.23 13.82 8.01 18.91 15.11 27.48

1965 12.98 15.55 13.65 6.85 18.73 15.03 27.58

1966 12.64 17.68 12.77 3.01 19.44 15.56 29.91

1967 12.65 14.37 7.19 0.29 13.30 12.56 23.64

1968 11.80 9.04 6.46 -7.09 11.23 9.75 20.97

1969 8.41 14.90 8.22 -9.77 7.02 9.82 27.18

1970 11.26 18.63 15.17 -5.80 15.46 14.39 29.43

1971 8.78 17.42 15.26 -3.14 15.84 13.44 30.69

1972 7.96 16.64 14.49 -3.56 12.26 12.39 30.44

1973 7.74 16.33 18.39 -5.63 6.40 11.32 29.76

1974 6.21 17.33 15.10 -4.37 5.56 11.15 28.07

21

1975 5.64 16.57 18.51 -5.81 3.61 10.44 27.21

1976 5.53 16.29 17.96 -3.90 6.22 10.62 26.38

1977 5.68 17.56 14.54 -1.96 10.19 11.66 27.31

1978 11.90 18.87 24.31 -2.32 18.26 16.28 31.24

1979 7.11 14.25 21.15 -3.02 12.04 11.54 28.39

1980 6.04 12.63 12.72 -6.41 7.58 9.00 25.67

1981 5.34 11.21 8.25 -5.49 2.77 6.96 24.18

1982 5.56 10.09 8.34 -5.47 6.71 7.45 22.90

1983 6.60 10.09 8.55 -4.67 7.16 7.85 23.03

1984 6.60 8.96 9.33 -8.04 8.04 7.46 22.91

1985 8.05 11.15 9.60 -3.39 7.55 8.74 22.36

1986 8.82 12.28 10.61 -0.44 7.86 9.69 20.80

1987 9.15 12.64 10.39 -0.20 7.80 9.95 18.39

1988 8.91 10.82 10.11 -0.11 8.02 9.27 15.79

1989 9.79 10.80 10.70 0.63 8.95 9.85 15.76

1990 10.33 10.43 9.62 0.65 7.95 9.52 15.84

1991 10.95 10.78 9.49 0.76 7.88 9.79 14.57

1992 9.27 9.46 9.30 3.26 6.48 8.52 13.08

1993 10.53 11.00 10.45 4.18 6.95 9.73 12.56

1994 10.00 9.06 5.35 3.11 4.26 7.83 11.16

1995 5.10 5.30 5.13 3.83 4.70 5.07 10.18

1996 9.11 5.33 0.62 3.75 5.33 6.05 10.32

1997 9.29 8.82 11.81 4.95 13.02 10.04 10.85

1998 10.39 9.71 12.72 4.84 10.96 10.26 11.59

1999 10.42 10.20 25.94 5.15 6.40 10.10 12.64

2000 10.11 10.58 28.94 5.37 14.90 12.43 13.36

2001 9.79 11.29 36.34 5.30 19.56 14.21 14.78

2002 10.66 12.11 12.21 5.39 22.41 14.03 15.53

2003 10.80 12.10 11.98 5.42 6.80 10.24 15.80

2004 11.99 11.76 12.47 5.44 19.78 13.60 16.31

2005 13.74 11.93 14.20 5.76 20.74 14.56 16.90

2006 14.42 11.98 15.18 5.94 23.56 15.46 17.66

2007 13.00 12.09 15.71 6.78 18.17 13.78 18.99

2008 13.03 12.01 14.84 7.24 11.47 12.38 19.19

2009 14.14 12.46 15.79 7.00 11.53 13.08 19.63

2010 14.89 12.84 16.98 8.37 12.75 13.82 20.12

2011 15.75 13.16 17.67 10.65 15.74 14.92 21.23

2012 15.73 13.89 19.65 13.64 16.68 15.49 21.70

2013 15.71 13.85 20.49 13.54 18.43 15.87 21.71

2014 15.08 15.45 20.45 22.74 24.57 17.57 21.80

2015 15.63 15.20 21.00 23.16 26.42 18.06 22.21

Source of data: Calculated based on statistics from the China Statistical Yearbook and the Statistical Yearbook

of 5 autonomous regions from 1952 to 2016.

22

Appendix 2

Comparison of Provincial MTB between EMRs and

Sub-National Localities Average (1995-2015) (%)

Inner

Mongolia Guangxi Ningxia Tibet Xingjiang EMRs

Sub-National

Localities

1995 5.10 5.30 5.13 3.83 4.70 5.07 4.87

1996 5.60 5.33 6.25 3.75 5.36 5.43 5.22

1997 5.73 5.46 6.27 3.82 5.24 5.49 5.55

1998 6.15 6.26 7.23 3.98 5.91 6.15 5.85

1999 6.28 6.78 7.12 4.32 6.13 6.45 6.18

2000 6.17 7.07 7.06 4.57 5.80 6.44 6.39

2001 5.80 7.84 8.17 4.39 6.38 6.83 7.04

2002 5.81 7.40 7.02 4.51 7.22 6.80 7.00

2003 5.81 7.22 6.74 4.40 6.80 6.59 7.17

2004 6.47 6.93 6.98 4.55 7.05 6.75 7.35

2005 7.11 7.10 7.79 4.84 5.98 6.83 8.06

2006 6.94 7.22 8.45 5.01 7.21 7.14 8.34

2007 7.67 7.19 8.71 5.90 8.11 7.62 8.72

2008 7.66 7.38 7.89 6.30 8.63 7.75 8.97

2009 8.74 8.00 8.24 6.82 9.09 8.49 9.34

2010 9.17 8.07 9.09 7.22 9.21 8.77 9.83

2011 9.45 8.09 10.46 9.04 10.90 9.32 10.74

2012 9.78 8.95 11.27 12.35 12.11 10.08 11.30

2013 10.17 9.12 11.96 11.65 13.36 10.58 11.59

2014 10.38 9.07 12.35 13.50 13.83 10.81 11.78

2015 10.89 9.02 12.84 13.36 11.87 10.60 12.11

Data source: Calculated based on statistics from China Statistical Yearbook and the Statistical Year Book

of 5 autonomous regions from 1995 to 2016.

Appendix 3

Comparison of Narrow MTB between EMRs and

Sub-National Localities Average (2000-2015) (Tax Revenue/GDP) (%)

Inner Mongolia Guangxi Ningxia Tibet

Total

Tax

Revenue

Tax Revenue

of Central

Government

Total

Tax

Revenue

Tax Revenue

of Central

Government

Total

Tax

Revenue

Tax Revenue

of Central

Government

Total

Tax

Revenue

Tax Revenue

of Central

Government

2000 9.46 4.19 8.58 4.08 10.41 4.28 6.76 2.06

2001 8.75 3.85 9.72 3.98 10.35 3.26 6.28 2.09

2002 11.03 4.16 9.43 4.73 10.31 4.49 6.05 2.31

2003 11.28 4.53 9.55 5.02 10.07 4.46 5.89 2.17

2004 12.55 5.55 9.59 5.16 11.24 5.34 5.66 2.09

2005 14.32 6.69 9.87 5.33 12.79 6.35 6.23 2.61

23

2006 14.80 6.95 10.00 5.43 13.13 6.52 6.31 2.78

2007 12.36 7.15 10.65 6.22 13.49 7.39 6.76 3.18

2008 12.23 7.05 10.33 5.89 13.45 7.26 7.48 3.65

2009 12.16 6.77 10.48 5.96 14.04 7.61 7.69 3.56

2010 13.33 7.39 11.13 6.30 15.06 8.01 9.88 4.94

2011 13.92 7.54 11.78 6.94 15.36 7.42 15.71 8.22

2012 13.99 6.96 13.08 7.19 17.36 8.39 21.60 11.63

2013 13.49 6.37 12.64 6.58 17.74 8.41 17.80 9.06

2014 11.69 4.71 12.63 6.37 17.32 8.10 18.54 9.24

2015 12.01 4.73 12.32 6.18 17.11 8.17 18.73 9.80

Xingjiang EMRs

Sub-National

Localities

Total

Tax

Revenue

Tax Revenue

of Central

Government

Total

Tax

Revenue

Tax Revenue

of Central

Government

Total Tax Revenue Tax Revenue of Central

Government

2000 10.95 5.99 9.49 4.56 12.09 6.64

2001 11.88 6.40 9.94 4.46 13.02 6.91

2002 12.30 6.62 10.57 4.95 14.05 7.25

2003 12.14 6.68 10.66 5.17 14.33 7.71

2004 13.97 8.39 11.57 5.98 14.65 7.97

2005 14.97 9.37 12.65 6.72 16.14 8.74

2006 15.82 9.92 13.10 6.97 16.78 9.01

2007 16.83 10.83 12.65 7.53 18.30 11.72

2008 18.41 11.78 12.80 7.55 18.11 11.35

2009 18.58 11.62 12.80 7.37 18.08 11.27

2010 20.10 12.56 13.91 8.00 18.74 11.61

2011 21.57 12.84 14.76 8.34 19.56 11.95

2012 22.21 12.74 15.59 8.30 20.50 11.78

2013 21.00 11.12 15.01 7.54 20.15 11.16

2014 20.46 10.75 14.23 6.77 20.12 10.98

2015 19.25 9.88 13.98 6.55 19.84 10.75

Source of Data: Calculated based on statistics from China Taxation Yearbook from 2000 to 2016.

Appendix 4

Tax Revenue Structure of EMRs %

Inner Mongolia

Domestic VAT

Business

Tax

Enterprise

Income Tax

Personal

Income Tax

Resource

Tax

2000 16.53 23.06 13.09 6.28 2.52

2001 17.65 23.33 18.08 7.93 2.40

2002 13.12 19.86 6.77 4.28 1.29

2003 14.00 22.52 4.44 3.37 1.25

2004 15.46 25.86 4.09 3.46 1.22

24

2005 16.26 26.26 6.50 3.38 2.23

2006 15.33 22.90 7.03 3.11 3.29

2007 23.60 34.47 12.50 5.26 4.99

2008 23.50 30.64 13.37 5.46 5.02

2009 20.85 32.39 14.24 5.65 5.24

2010 19.60 33.82 14.60 5.67 5.31

2011 19.63 30.95 17.03 5.87 6.20

2012 16.37 28.65 16.12 4.27 6.10

2013 15.47 29.30 12.89 3.73 5.86

2014 14.01 27.30 8.83 3.24 5.85

2015 12.77 24.21 7.75 3.40 8.02

Guangxi

Domestic VAT

Business

Tax

Enterprise

Income Tax

Personal

Income Tax

Resource

Tax

2000 23.05 31.79 16.51 11.32 0.87

2001 18.81 25.90 29.39 13.20 0.63

2002 20.07 31.45 10.95 8.84 0.69

2003 19.59 32.71 8.91 7.07 0.77

2004 23.25 41.32 10.22 8.27 0.95

2005 20.62 35.86 9.72 7.65 1.03

2006 20.83 35.99 10.43 6.54 1.12

2007 20.82 36.48 10.62 6.80 1.12

2008 19.00 35.20 10.74 5.62 1.19

2009 15.56 37.08 8.63 4.80 1.28

2010 14.51 38.86 11.04 4.84 1.31

2011 13.36 37.34 13.28 4.56 1.33

2012 11.12 34.40 11.27 3.17 1.34

2013 11.28 34.74 10.74 3.17 1.37

2014 12.93 32.85 11.18 3.09 1.75

2015 13.57 31.20 10.64 3.37 1.75

Ningxia

Domestic VAT

Business

Tax

Enterprise

Income Tax

Personal

Income Tax

Resource

Tax

2000 19.20 35.63 14.15 6.78 0.33

2001 16.44 32.11 25.66 8.45 0.30

2002 20.02 42.41 8.39 6.61 0.59

2003 20.65 44.65 6.88 5.33 0.53

2004 24.58 45.76 7.29 6.37 0.51

2005 23.72 42.81 7.09 6.03 0.62

2006 24.55 41.89 7.17 5.48 1.36

2007 24.15 39.21 7.74 5.97 2.14

2008 23.64 38.71 8.00 5.17 1.49

2009 18.53 42.96 10.22 4.96 1.66

25

2010 15.97 44.36 11.10 4.39 1.51

2011 13.78 45.23 13.65 4.23 1.55

2012 12.67 44.67 12.26 3.23 1.98

2013 13.42 44.52 10.89 3.11 2.11

2014 15.40 41.96 11.32 2.98 2.17

2015 13.94 38.95 9.58 3.50 5.19

Tibet

Domestic VAT

Business

Tax

Enterprise

Income Tax

Personal

Income Tax

Resource

Tax

2000 15.58 38.26 31.76 6.11 3.35

2001 15.86 42.16 24.25 8.58 3.54

2002 14.80 58.00 12.56 5.16 3.61

2003 14.37 61.47 11.01 4.43 3.06

2004 15.44 59.94 10.43 4.87 3.20

2005 14.48 59.75 10.92 5.52 2.94

2006 17.06 57.74 9.83 5.08 3.39

2007 17.91 55.18 10.71 4.97 4.28

2008 18.10 52.34 12.31 4.67 3.82

2009 15.34 54.40 11.35 3.94 2.70

2010 13.84 47.31 17.92 7.83 2.61

2011 11.30 34.91 24.55 17.67 1.77

2012 10.97 29.61 15.57 33.97 1.43

2013 15.05 39.31 17.49 16.05 1.36

2014 18.53 37.25 21.13 10.99 0.82

2015 18.85 45.23 12.50 9.22 1.04

Xingjiang

Domestic VAT

Business

Tax

Enterprise

Income Tax

Personal

Income Tax

Resource

Tax

2000 23.66 34.34 9.17 11.84 4.74

2001 23.93 34.74 12.85 13.54 5.65

2002 22.61 35.04 7.65 8.41 5.44

2003 23.94 37.87 4.97 6.03 4.41

2004 26.52 35.25 5.11 6.07 4.21

2005 30.10 33.42 5.31 6.53 4.26

2006 31.49 31.54 5.74 6.14 4.55

2007 30.19 30.92 6.37 6.94 4.29

2008 28.39 31.90 9.28 6.34 3.80

2009 19.14 37.32 9.32 6.71 4.08

2010 18.09 36.34 9.61 6.58 7.80

2011 16.30 35.36 10.69 6.46 10.96

2012 14.39 37.10 11.44 5.13 9.92

2013 14.42 36.99 10.29 5.22 8.68

2014 17.62 31.79 10.17 5.42 8.81

26

2015 16.33 30.77 10.72 6.45 7.70

Source of Data: Calculated based on statistics from China Taxation Yearbook from 2000 to 2016.

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