China plans to hire the largest number of tax officials in more than a decade this year, as Beijing steps up taxation reform and tries to strengthen enforcement amid a widening budget deficit.
Making China more fiscally sustainable is a major challenge for President Xi Jinping’s government, which is increasing spending to boost weak consumption at a time when a property slump and crackdowns on fee collection have left many local authorities desperately short of cash.
Central and local government tax departments plan to recruit 25,004 staff in 2026, accounting for two-thirds of the new bureaucrats to be appointed from among the millions taking part in fiercely competitive national exams, according to the state civil service administration.
The plans mark a fourth successive year of heavy recruitment of tax officials, with the number of appointments set to marginally exceed a previous peak of 24,985 in 2023 to reach the highest level since at least 2012. The increase in tax department hires comes despite an expected slight fall in overall civil service recruitment this year.
Li Qian, an expert at the research arm of Offcn Education Technology, a private institution that offers training for the civil service exam, said the increased hiring was in part needed to replace retirees from a “wave” of tax officials recruited in the 1980s.
“But stepped-up tax supervision and scrutiny also contributed to the increasing hiring by creating lots of demand for finance, accounting, statistics and IT professionals,” Li said.
China last year set a budget deficit target of 4 per cent of GDP, breaching a long-standing ceiling of 3 per cent.
On a broader metric of fiscal health that estimates the difference between revenues and total spending across all levels of government, the country’s fiscal deficit has been widening for two decades. Goldman Sachs analysts have estimated that China’s broad annual fiscal deficit will reach about 12 per cent of GDP by end-2025.
Yang Zhiyong, president of the Chinese Academy of Fiscal Sciences, a think-tank affiliated to the finance ministry, urged more reforms, saying local governments could “struggle to cover the gap” and be forced to increase already substantial borrowing.
“New industries are creating new tax bases, but without timely tax reform, these cannot be translated into real revenue,” Yang said.
The central government has already increased efforts to collect revenue from the rapidly expanding and previously only loosely taxed digital economy, particularly areas such as online commerce and livestreaming.
The secretary-general of an association for tax officials in northern China said the increase in the number of people generating taxable income from such activities had made the country’s old model of assigning a single officer to handle specific taxpayers no longer sustainable.
“There’s a need for new recruits to be skilled in accounting and AI data analysis to manage the extensive tax work tied to the fast-growing online economy,” said the secretary-general, who declined to be identified.
Tax authorities have also announced moves to tighten tax enforcement and to scale back the use of corporate tax breaks by local governments that have been accused of fuelling industrial overcapacity.
Companies that previously benefited from local tax breaks have been caught out. Officials at two finance companies registered in Beijing said they knew of several groups that were hit with payment demands after tax incentives they had claimed were no longer deemed compliant.
Authorities are also broadening the tax base by capturing more high-income earners, including those making capital gains on offshore equity investments. Chinese investors with overseas portfolios face a 20 per cent levy on their global income, the Financial Times reported in August.
China’s tax revenues have fluctuated in recent years and fell 3.4 per cent year on year to Rmb17.5tn ($2.5tn) in 2024. The Communist party leadership in October called for further reform as part of the country’s economic plan for the five years starting in 2026.
In a politically sensitive move, Beijing is considering taking a greater share of tax collection from local authorities, which have been hard hit by a multiyear property market slump that has deprived them of crucial revenues from land sales.
Local government income has also been reduced by a decade of campaigns by Beijing to reduce the taxes and fees they can charge.
“The central government should hold more fiscal powers as appropriate and accordingly raise the proportion of its expenditure,” the party’s elite central committee said in October, but added: “More fiscal resources should be placed at the disposal of local governments.”
Beijing is also seeking to strengthen collection of direct taxes, such as income tax. The state currently relies heavily on indirect taxes, including consumption taxes and value added tax.
However, analysts do not expect the reforms to be anything as sweeping as an overhaul led by former premier Zhu Rongji in 1994 that centralised China’s fiscal architecture while devolving authority over spending in areas such as welfare to localities.
That is in part because of the political and economic sensitivity of many potential reforms.
Introduction of a nationwide property tax was first floated more than a decade ago, with legislative groundwork largely completed by 2022. But the Covid-19 pandemic and subsequent collapse of China’s housing market forced its postponement.
Lou Jiwei, a former finance minister and long-standing advocate of the property tax, told a recent conference in Beijing that he still saw it as the most suitable levy for local governments.
“The better the public services a local government provides, the more property values rise, and the higher the tax revenue. The two are incentive-compatible,” he said.
Yet even Lou accepted that this was not the moment for reform. “The market is still in decline, making it difficult to introduce a property tax at this stage.”
With contributions by Haohsiang Ko in Hong Kong and Cheng Leng and Joe Leahy in Beijing