ChinaStepsUpTaxLawReformstoStrengthenLocalFinances

Reforms to Strengthen Local Finances

China’s Ministry of Finance plans to accelerate legislation for a local surtax and advance the consumption tax law in 2026.

The moves, outlined in a ministry report released Monday, reflect efforts to give local authorities more stable and autonomous revenue sources amid ongoing fiscal pressure.

A key focus is the local surtax, a reform first proposed at a major Communist Party meeting in July 2024. The tax would merge several existing levies, including urban maintenance and education-related surcharges, and allow local governments to set rates within a prescribed range.

The ministry also said it will cooperate on drafting a consumption tax law. The tax, currently a major central government revenue source generating over 1 trillion yuan ($145 billion) annually, is mainly collected at the wholesale and import stages on goods such as cars, fuel, tobacco and alcohol.

Planned changes include shifting part of the collection to the retail level and allocating incremental revenue to local governments.

The consumption tax law had been included in a 2025 legislative agenda but was not submitted for review that year.

China has enacted laws for 14 of its 18 existing taxes, though several major levies, including those related to property, still lack formal legislation.

Separately, the ministry said it will continue revising key fiscal laws and improving tax administration, while stepping up efforts to manage local government debt risks.

Contact editor Qing Na (qingna@caixin.com)