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Local fiscal operations are generally stable, but the pressure to increase revenue remains high.

Yicai.com found that the fiscal departments of 10 provinces have disclosed the fiscal revenue and expenditure data for the first seven months. Among them, the growth rate of general public budget revenue in eight places, including Jilin, Hunan, Sichuan, Guizhou, Hainan, Yunnan and Ningxia, has continued to increase, and most of the growth rates are less than 2%. The growth rate of revenue in two places, Jiangxi and Shanxi, has slowed down.

Compared with the growth rate of general public budget revenue in various places in the first half of this year, the decline in revenue in six places including Sichuan has slightly expanded, while the decline in revenue in four places including Shanxi has narrowed.

Luo Zhiheng, chief economist of Guangdong Securities, told Caixin that judging from the published data, local fiscal revenue is still under pressure. Nationwide, local general public budget revenue increased by 0.9% year-on-year in the first half of 2024, a decrease of 12.6 percentage points from the same period last year. From a local perspective, although some regions achieved positive growth in general public budget revenue in the first seven months, the growth rate was narrower than last year, and the revenue growth rate in some regions was negative.

Low fiscal revenue

Judging from the tax revenue data of the 10 provinces that have been made public, tax revenue in Shanxi, Jilin, Guizhou, Jiangxi, Sichuan and other places has continued to decline. The growth rate of other provinces where tax revenue has continued to grow is also low, most of which do not exceed 2%. The overall tax growth rate continues the previous sluggish trend. According to the Ministry of Finance, the national tax revenue in the first half of this year fell by 5.6% year-on-year.

Why is local tax revenue still sluggish? Luo Zhiheng analyzed that the primary factor is the impact of the slowdown in economic growth. Economic growth is the basis for tax revenue growth. When economic growth slows down, tax revenue growth will also be constrained. Secondly, the price level is falling, and the prices of some energy and mineral products continue to fall, dragging down the growth rate of tax revenue. In addition, the decline in some tax revenues is also affected by the base effect, that is, the high base of the same period last year led to a decline in the year-on-year growth rate this year.

For example, the Ministry of Finance previously explained that the decline in the national general public budget revenue in the first half of the year (-2.8%) was mainly due to the fact that some of the tax deferrals for small and medium-sized enterprises in the manufacturing industry in 2022 were deposited in the first few months of 2023, which raised the base, and the four tax reduction policies introduced in mid-2023 caused a tail-end reduction in fiscal revenue this year, and other special factors that lowered the revenue growth rate. After deducting the impact of this special factor, the national general public budget revenue in the first half of the year increased by about 1.5% on a comparable basis, maintaining a restorative growth trend.

Some provinces also gave explanations for the decline in local tax revenue in July. For example, according to public data from the Jilin Provincial Department of Finance, local general public budget revenue fell 6.1% year-on-year in July, mainly due to factors such as intensified competition in the automobile market and a sluggish real estate market, which led to a reduction in tax revenue.

As local tax revenues are generally weak, many local non-tax revenues have maintained rapid growth to make up for the reduction in tax revenues and balance fiscal revenue and expenditure. Non-tax revenues in Jilin, Shanxi, Hunan, Sichuan and other places maintained double-digit growth in the first seven months.

For example, data from the Jilin Finance Department showed that from January to July, the province's non-tax revenue was 24.76 billion yuan, a year-on-year increase of 29.5%. Among them, the income from the paid use of state-owned resources (assets) was 10.87 billion yuan, an increase of 53.7%, mainly driven by the increased disposal of resources and assets in various places; the fines and confiscations were 3.54 billion yuan, an increase of 45.9%, mainly due to the centralized payment of fines and confiscations from major public security cases such as online gambling and online fraud, as well as discipline inspection and supervision.

At present, many places rely more on land transfer income, but with the sluggish real estate market in recent years, land transfer income has continued to decline, and this year's land transfer income has continued to fall, which has also aggravated the tension in local fiscal funds.

According to the Ministry of Finance, in the first half of this year, local governmentsfundThe revenue from the transfer of state-owned land use rights in the country was 1,526.3 billion yuan, down 18.3% year-on-year. This decline has widened compared with the previous period. In recent months, the decline in land transfer revenue in some places has continued to widen.

For example, data from the Jiangxi Finance Department showed that in the first seven months of this year, the province's government fund revenue was 60.69 billion yuan, down 21.5% year-on-year, of which the revenue from the transfer of state-owned land use rights was 44.27 billion yuan, down 30.1% year-on-year, a 6 percentage point increase from the first half of the year. Of course, there are also places like Jilin where the decline in land transfer revenue has narrowed.

From the perspective of fiscal expenditure, general public budget expenditure of some localities accelerated in the first seven months, and with the ultra-long-term special treasury bonds and local government specialBondsWith the acceleration of issuance, the decline in government fund expenditure has continued to narrow, and some places have even maintained growth.

Alleviate the contradiction between income and expenditure

Luo Zhiheng said that the current local fiscal operation is still in a tight balance, facing the rigid expenditure tasks of debt reduction and three guarantees. From the expenditure side, the growth rate of expenditure in most provinces in the first seven months has slightly expanded compared with the first half of the year. This to a certain extent reflects the positive actions of local governments in ensuring people's livelihood and stabilizing the economy, and may also affect the contradiction between local fiscal revenue and expenditure to a certain extent. Specifically, local finance needs to assume more expenditure responsibilities, such as ensuring basic people's livelihood, supporting infrastructure construction, and promoting industrial upgrading, but the growth of fiscal revenue is constrained by many factors.

Many places have similar feelings.

For example, when members of the Standing Committee of the Liaoning Provincial People's Congress reviewed the provincial government's report on the implementation of Liaoning Province's budget in the first half of 2024, they talked about some difficulties and problems in budget implementation and said that the foundation for fiscal revenue growth is not solid enough, the allocation and use of some special funds is slow, and the operating pressure on grassroots finances is relatively high.

In the "Report on the Implementation of Anhui Province's Budget in the First Half of 2024 and Work Opinions in the Second Half of the Year" recently released by the Anhui Provincial Department of Finance, when talking about some problems and challenges in budget implementation, it said that the overall economic situation in the province is stable, but the foundation for continued recovery and improvement is still unstable, and the pressure on fiscal revenue growth is relatively large. Rigid expenditures such as debt resolution and people's livelihood security are constantly increasing, and the fiscal revenue and expenditure situation remains grim; some counties and districts have relatively weak financial resources, and the operation of the "three guarantees" is tight. A few counties and districts have heavy debt resolution tasks, and there is a certain pressure on the stable operation of the finances.

How to alleviate the current contradiction between local fiscal revenue and expenditure?

Luo Zhiheng suggested that the first priority is to strengthen the construction of financial resources, and enhance the blood-making function of local finance by optimizing the business environment, supporting enterprise development, and cultivating new economic growth points. Secondly, optimize the expenditure structure, and reasonably adjust the expenditure structure on the premise of ensuring basic people's livelihood, give priority to key expenditures and rigid expenditures, and reduce general expenditures and non-urgent and non-rigid expenditures.

This year, local governments continued to tighten their belts, and the relevant regulations became more detailed. For example, Suzhou issued new regulations this year, requiring that official travel along the high-speed rail line should not be arranged for official vehicles or car rentals in principle, and that official receptions arranged in government canteens should, in principle, provide the same employee meals.

Anhui requires that this year the provincial government continue to arrange the "three public" expenditure budget in accordance with the principle of "only reduction and not increase", and public funds will be reduced by 5%. In 2024, non-key and non-rigid expenditures at the provincial level will be reduced by 2.68 billion yuan compared with the previous year.

At the same time, Anhui strengthened financial support for major strategic tasks. In 2024, it compiled a list of 81 key guarantee items in three categories, namely provincial public services, industrial support, and key construction, with a total cost of 84.3 billion yuan. It promoted the establishment of five new special working groups for the overall coordination and integration of funds, and further improved the mechanism of concentrating financial resources to accomplish major tasks.

Luo Zhiheng suggested that in order to ease the contradiction between local fiscal revenue and expenditure, the central government should increase its transfer payments to local governments, especially support economically difficult areas and grassroots finances, to help local governments ease fiscal pressure.

This year, the central government's transfer payments to local governments are expected to exceed 10 trillion yuan again, reaching 10.2 trillion yuan. According to the Ministry of Finance, as of the end of June, 8.99 trillion yuan had been allocated, accounting for 88.1%.

In order to enhance local financial autonomy, a number of new measures have been deployed in the recent "Decision of the Central Committee of the Communist Party of China on Further Comprehensively Deepening Reforms and Promoting Chinese-style Modernization", such as increasing general transfer payments; pushing forward the collection of consumption tax and steadily transferring it to local governments; optimizing the sharing ratio of shared taxes; and studying the merger of urban maintenance and construction tax, education surcharge, and local education surcharge into local surcharges.

Luo Zhiheng said that the fiscal and taxation system reform should be promoted, the tax system should be improved, the efficiency of tax collection and management should be improved, and at the same time, the management of non-tax revenue should be strengthened to broaden the sources of fiscal revenue.

(This article comes from China Business Network)