A breakdown of China's government revenue and tax history over nearly 75 years

This chart shows China's government revenues from taxes and other sources during 1952–2024.

The overall level of revenues averaged about 30 percent of GDP before China's then-leader Deng Xiaoping's 1978 "Reform and Opening Up" policies. Revenues declined sharply thereafter in the 1980s, increased sharply from the mid-1990s, reaching a peak of about 28.5 percent of GDP in 2015. When adding land sales and retained profits from state-owned enterprises (SOE), revenues peaked at 39 percent in 2018.

The composition of revenues has changed dramatically. In the pre-reform period, a substantial share of overall revenues came as profits of SOEs. Compulsory production quotas at off-market prices, financial repression in favor of SOEs, and strict quotas on consumer goods imports diverting demand to consumer goods produced by SOEs were all implicit ways of extracting revenues, which were reflected in the profits of SOEs.  

After the mid-1990s, and consistent with the turn to markets, more modern tax levers have been used, including value-added taxes (VAT), personal and corporate income taxes, and social insurance contributions. Distinctively, revenues from land sales have accounted for a substantial share of revenues since 2003.  Throughout its history, therefore, China has generated a substantial share of revenue from sources other than taxes on its people, which is surprising for a communist state.

Regardless of how they are measured, revenues and taxes have been declining for most of the last decade; for example, taxes (excluding social insurance contributions) have collapsed by nearly 5.5 percentage points, from 18.4 percent of GDP in 2012 to 13.0 percent in 2024, and revenues including land sales and retained SOE profits fell 6.5 percentage points, from 39.0 percent of GDP in 2018 to 32.5 percent in 2024. These tax levels are associated with a struggling, lower middle-income country, not an aspiring superpower.

How much of this decline is attributable to growth that is even slower than headline numbers indicate and how much to the tax cuts enacted over the last decade is difficult to say. But it also seems that the government was so reliant on non-tax sources that, once they dried up, it became politically difficult to turn around and impose taxes on the population.

ADDITIONAL NOTES

1. Subsidies to loss-making SOEs are spending, as in the International Monetary Fund's system of fiscal accounting. China's budget subtracted them from revenue in 1985 to 2006; they are added back here. Before 1985 they were also subtracted, but the amounts were not published, so they cannot be added back; the broadest measure is broken between 1984 and 1985 for this reason, and most of the rise of the bars in 1985 comes from it. Without the add-back, 1985 would be 25.0 percent of GDP, against 25.2 percent in 1984.
2. Not available, and so left out: subsidies to loss-making SOEs before 1985; social insurance contributions, 1984 to 1988 (they were 0.9 percent of GDP in 1989); the social insurance funds' own income, 1998, 1999 and 2010; government funds inside the budget, 1997 (2.2 percent of GDP in 1998); local state capital budgets, 2007 to 2011 (central government only); and retained SOE profits before 1996.