In China the Tax revenues are shared among the central government and the local government. It is shared on the basis of their responsibilities. The central government is mainly responsible for expenditures for national defense, foreign affairs, and the operation of central government agencies, as well as expenditures for economic restructuring, development coordination among regions and macroeconomic adjustment. And the local governments are mainly responsible for expenses on the operation of government agencies under their respective jurisdictions, as well as expenditure for economic and social development in their regions.

In accordance with the principle of matching responsibilities with revenues and some other principles, taxes are divided into central government taxes, local government taxes and taxes shared between the central and local governments. Central taxes are those needed for protecting national interests and undertaking macroeconomic regulation. Shared taxes are those directly related to the economic development. Local taxes are those that are suitable for collection by the local governments. The details are as follows:

Central tax revenues: customs duties; import-related VAT and consumption tax collected by the customs; consumption tax; Enterprise income tax which is collected from railway and transportation and paid by the China’s Post, Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, Construction Bank of China, Development Bank of China, Agricultural Development Bank of China, Import and Export Bank of China, Offshore Petroleum and natural gas Corp, Petro China Company Limited and China Petroleum &Chemical Corporation; Operation tax, profits and city maintenance tax paid by the railway departments, various banks and various insurance companies; profits handed over by the central enterprises and the vessel tonnage tax and vehicle purchase tax for the income with special purposes.

Local tax revenues: Operation tax(excluding the part paid by the railway department, various banks and various insurance companies); profits handed over by the local enterprises; city and township land usage tax; fixed assets investment orientation regulation tax; city maintenance tax (excluding the part paid by the railway department ,various banks and various insurance companies); house property tax; farmland occupation tax; land appreciation tax; urban real estate tax; vehicle and vessel usage tax; vehicle and vessel usage license plate tax; deed tax; stamp tax; agriculture tax and animal husbandry tax (including agriculture specialty tax)and State owned land use tax.

Tax revenues shared between the central and local governments:

Domestic VAT: 75 per cent for central government and 25 per cent for local governments.

Income Tax: 60 percent for the central government and 40 percent for the local governments.
Resource Tax: Tax paid by the offshore oil enterprises goes to the Central Government, and the rest goes to the Local Governments.

Stamp tax revenue collected on stock transactions: 97percent goes to the Central government; the remaining 3 percent goes to the local governments.

State tax agencies and local tax agencies have been established separately. In principle, state taxes and shared taxes are collected by the State tax agencies, while the local taxes are collected by the local tax agencies.

The Central Government returns a part of its tax revenue to local governments based on the growth in local governments value-added taxes and consumption tax. The central government provides assistance in the form of fiscal transfers to less developed regions and the regions inhabited by ethnic minorities.

Governments at different levels manage Chinese budget separately. The budget year is based on the calendar year, starting on January 1 and ending on Dec 31. There are five levels of budget management. Local Government budgets and Central Government budgets forms the National budget. According to the Budget Law of the People's Republic of China, the budget draft and budget implementation of the central and local governments must be reviewed and approved by the National People's Congress and local people’s congresses respectively. The Standing Committee of the National People’s Congress and the Local Congresses reviews and approves the Central and Local budget adjustment plans and final accounts.