Government reports first ever single-digit annual growth, with property a major culprit

China's tax revenue slowed to a single-digit growth for the first time last year, as the economyeased.

Wang Jun, director of the State Administration of Taxation, told a work conference on Friday thattax collected during 2014 grew 8.8 percent to 10.38 trillion yuan ($1.67 trillion).

The SAT did not disclose its revenue growth in 2013, but calculations based on 2014's growthrate and other data suggest revenue grew then by 11.6 percent, after an 11.5 percent growth in2012.

The Ministry of Finance is yet to announce the total national tax take for the year, which combinestax collected by the SAT and the General Administration of Customs. Earlier, it revealed that inthe first 11 months, total revenue grew 7.5 percent to 11.06 trillion yuan.

Experts said recent structural tax cuts - including a trial program of replacing business tax withvalue-added tax from 2012, and tax breaks for small businesses - did affect overall tax growth toan extent, but they had minimal impact on the final figures, with slowing GDP very much thedominant factor in the dropped tax revenues.

The most significant effect of the slowdown was shown in the property sector, with the growth ofbusiness tax collected from property transactions in the first nine months plunging 33.6 percent,the ministry's data showed.

Slipping fiscal revenue is also likely to limit the government's ability to adopt an accommodativefiscal policy, said experts, and put further pressure on the country's overall growth prospects.

The ministry will unveil a more detailed breakdown of tax revenue by sector later this month.

Wang Chaocai, deputy head of the Fiscal Sciences Research Center, said if revenue growthcontinues to drop and fixed fiscal expenditure increases, considerable pressure will grow on thepublic finances.

One way to alleviate that might be to dip into government reserves accumulated over the years,he said, which currently stand at 18.3 trillion yuan, according to the most recent estimates.Alternatively, the shortfall could be made up by a continuation of the government's austeritymeasures, launched in 2013, Wang said.

Zhang Zhiwei, chief China economist with Deutsche Bank AG, warned in a recent report thatChina's broader fiscal revenues, including tax and land sales, could grow by just 1 percent in2015, posing a huge challenge for the economy.

Recent data show that many local governments still rely too heavily on land sales for revenue. In2008, one-quarter of all regional revenue came from land sales and that had risen to 35.2percent by 2013. But after falling to 27 percent last year, the China Index Academy said localgovernment finances could now be under serious pressure.

On Thursday, the SAT announced a series of preferential tax policies on mergers andacquisitions to encourage more industry consolidation. Companies buying more than half ofanother company's equity or assets will be allowed to delay their tax payments - previously therequirement was taking a 75 percent stake.

The SAT also announced companies involved in importing a list of 17 products - such aspharmaceutical products and consumer goods including lipid-lowering drugs and single lens andreflex cameras - will be afforded lower import duties in 2015, according to the People's Daily.

In accordance with various international trade agreements signed over recent years, China isexpected to lower duties on selected imported goods from the Association of Southeast AsianNations, Chile, New Zealand, Peru, Costa Rica, Switzerland, Iceland and China's specialadministrative regions of Hong Kong and Macao. Zero percent tariffs already exist on somegoods from Pakistan and Singapore, and goods covered by the Asia-Pacific Trade Agreement.