Individual income tax revenue experienced sustained double-digit growth in the first half of the year, surpassing consumption tax revenue for the first time in four years to become China’s third-largest tax revenue source.
Revenue from individual income tax increased by 13 percent, reaching CNY898.2 billion (approximately USD132.7 billion) during the six months ending June 30, compared to the previous year. This growth was fueled by active capital markets, higher earnings in thriving sectors, and more aggressive collection efforts targeting high-income groups, according to officials at the national tax agency.
Meanwhile, domestic consumption tax collections declined by 3.4 percent to CNY867.3 billion over the same period.
Wang Shiyu, chief auditor, highlighted that taxes on personal investments—particularly equity transfers and dividends—accounted for nearly half of the growth in individual income tax revenue. Revenue from restricted stock transfers nearly doubled year-over-year, and income from interest, dividends, and bonuses increased by over 15 percent.
Strong performance in specific industries contributed to higher incomes and increased tax payments. For instance, taxes paid by professionals in scientific research and technical services rose 15 percent, while those from employees in non-ferrous metal smelting and processing surged 41 percent.
Enhanced enforcement of tax compliance among high-income earners also played a role, resulting in an additional CNY34 billion (about USD5 billion) collected through efforts to recover overdue taxes and late payment penalties during the first half of the year.
Beyond fiscal contributions, individual income tax functions as a key tool for income redistribution. Over 200 million taxpayers filed annual tax settlement declarations last year, with more than 70 percent owing no extra tax after deductions. Generally, taxpayers earning less than CNY120,000 (around USD17,730) paid little or no tax, thanks to available deductions.
Additionally, over 60 percent of taxpayers with taxable income were within the lowest 3 percent tax bracket, underscoring the system’s role in supporting low-income groups while imposing higher taxes on wealthier earners.