China mulls tax, fiscal reforms as land sales fall

The Chinese government is expected to unveil tax and fiscal reforms next month that will allow local governments to explore new tax sources to offset their losses in land sales revenue.

The reforms will be announced during or after the Chinese Communist Party’s third plenary session of the current Central Committee’s 2022-2027 term.

The Third Plenum, joined by about 200 CPC Central Committee members and 200 ministers and military chiefs every five years, usually sets the course for China’s economic policy in the long term. It should have been held last November but it was postponed, reportedly due to a personnel reshuffle in the Ministry of Defense and the Ministry of Foreign Affairs last summer.

(The Chinese Communist system of governance is unfamiliar to many outsiders. Every five years there is a CCP National Congress gathering around 2000 people. The last one was in October 2022. Then the Central Committee (200 people) immediately holds the First Plenum. In the second year, there are the Second and Third Plenum on peronnel and economic topics, respectively. They are followed by the Fourth, Fifth, Sixth and Seventh Plenum and then the cycle begins anew with the next Central Committee’s installation.)

State media recently have been promoting the country’s upcoming tax and fiscal reforms. They report that the Chinese economy will focus on boosting the high-value manufacturing sectors and domestic consumption in the next decade, instead of relying heavily on property activities.

In a report published on Tuesday, the National Audit Office criticized local governments for failing to implement the central government’s fiscal policies accurately. It said local governments should increase their efforts in tax collection,