China's tax revenue increased 514.8 bln yuan, a year-on-year increase of 20 percent, to reach 3.0866 trillion yuan (excluding tariffs and agricultural taxes) in 2005, according to Xie Xuren, director-general of the State Administration of Taxation. Forecast says the GDP growth rate in 2005 was 9.8 percent. Why the increase of tax revenue far outpaces the GDP growth?

"The growth rate of tax revenue in 2005 is not very high if compared with the GDP growth rate calculated using current price," Xie Xuren said.

Xie said the phenomenon is absolutely normal when analysis is performed in aspects including growth pattern of tax revenue, price, import and export, and management of tax collection.

According to Xie, criteria for statistics are different. Tax revenue is calculated using current price; while GDP growth rate is calculated using fixed prices (comparable prices). If taking price factor into account, China's GDP growth rate calculated using current prices will be between 13 to 14 percent.

GDP structure is not the same with tax revenue structure. Tax revenue mainly comes from the secondary and tertiary industries. Leaving the value added in the primary industry out, the value added in the secondary and tertiary industries would far outnumber the GDP growth rate calculated using current prices.

Xie takes value-added tax, which represents 50 percent of the total tax revenue as an example. The value added in industry and commerce is the tax base for value-added tax. From January to November 2005, the value added of industrial enterprises above designated size calculated using comparable prices increased 16.4 percent. If the factory price of industrial products is taken into account, the country's industrial value added will reach 19 percent, which is basically the same to value-added tax's increase of 19.8 percent.

Foreign trade's effect on economic growth differs from that on tax revenue growth. Increase of imports will boost increase of tax revenue. But only exports can help increase GDP. This is one factor that helps explain the phenomenon that tax revenue increase outpaces GDP growth.

Improved management of tax collection also contributes to the phenomenon. Last year the taxation authority strengthened management of tax collection and intensified efforts in checks, and further improved services for taxpayers. "Last year the tax administration departments of all levels cleared defaulted tax payment of 20 bln yuan. The investigations of cases have helped collect tax of 36.7 bln yuan," Xie added.

Editor: Yan