China to Reform Consumption Tax, Boost Local Government Revenues

China will implement consumption tax reforms to improve local government revenues, as announced by Vice Finance Minister Wang Dongwei. The reforms aim to shift tax collection from production to consumption and address the financial strain on local administrations caused by reduced income from land sales.

China is set to reform its consumption tax system, moving towards a model that enhances local government revenues. Vice Finance Minister Wang Dongwei announced on Wednesday in Beijing that new measures will standardize non-tax revenue management.

Currently, the central government retains the bulk of consumption tax. The planned reform will allow local administrations to keep a larger share, addressing the fiscal challenges posed by decreasing land sales revenue amid a property market slump.

The Communist Party's latest plenum underscored the urgency of these reforms, noting that changes to the consumption tax collection—from production to consumption stages—will help boost municipal finances and guide improvements in the consumption environment.

(With inputs from agencies.)