China’s Hunan puts non-tax revenue in crosshairs, cracking down on sketchy fines

Hunan has become the latest Chinese province to tighten controls on non-tax revenue growth through a revision of local regulation, as Beijing intensifies efforts to revive market sentiment and private investor confidence.

The regulation changes, set to take effect on November 1, explicitly mandate that local-level governments fully remit proceeds from the disposal of confiscated goods – along with any interest they generate – to the state treasury, in a sign of how such non-tax revenue is now under stricter oversight by the central government.

Additionally, the controls forbid local officials from using fines as a tool to increase revenue, while also prohibiting the linking of law enforcement performance assessments to the amount of fines collected.

Non-tax revenue – including administrative fees, government fines and other sources – often reflects the financial burden on private firms, many of which have struggled amid a post-pandemic slowdown, cutthroat domestic competition and external trade tensions.

And its share in fiscal revenue has been growing as authorities in debt-ridden regions seek alternative income sources amid dwindling land sales.

Hunan’s move follows Beijing’s enactment of a Private Economy Promotion Law in May, aimed at better protecting private firms, which account for more than 60 per cent of China’s gross domestic product and more than 80 per cent of urban jobs. The law explicitly states that no public institution may impose fines without a legal basis.

South China Morning Post