Economic Observer Online
April 18, 2012
By Xi Si (席斯)
Translated by Song Chunling
Original article: [Chinese]

The Ministry of Finance earlier this month announced the cancellation of the airport construction fee. Instead, air passengers will now pay a similar levy towards the civil aviation development fund - 50 yuan per each seat on a domestic flight and 90 for international flights.

The decision to replace the airport construction fee (机场建设费) with the civil aviation development fund (民航基础建设发展基金) was clearly not because of the catchiness of the name, but the new title will make it easier for the government to collect the extra cash even when the days of construction fees are a distant memory.

The first airport construction fee was introduced in 1992 by Wenzhou Yongqiang Airport, and airports around China followed suit soon afterwards. In 1995, a government policy set a time limit of Dec. 31, 2005 for the collection of such fees, but the State Council later extended it by five years and then ten years.

In 2011, more than 20 billion yuan was collected as airport construction fees and levies for the civil aviation development fund.

Airport construction fees aren’t the only such charges to have had their lifespans extended – the water conservation fund, a 1 percent levy on most businesses, was extended from 2010 to 2020; advertising and entertainment firms pay 3 percent of their revenue in a special cultural tax and there is also an education surcharge and local education surcharge.

The State Council introduced many of these fees in the 1980s and 1990s. Although they are called “funds”, most them are collected through the tax department. However unlike taxes, funds can be introduced, charged, adjusted, extended or cancelled at the whim of government officials, instead of the usual procedure of public consultation and approval from the National People’s Congress (NPC).

Many of the funds have been cancelled as China’s economic growth has lifted tax income, but others remain an important source of government revenue.  

For example, the price regulation fund (价格调节基金), which dates back to the 1980s, was reintroduced in many regions last year. Originally, it had been intended as a means of combatting inflation. The burden of the fund was spread unevenly between industries - hotels and restaurants paid 10 percent of revenue to the fund, which was twice as much their business tax contributions.

Until the case of the renamed airport construction fee, the existence of these numerous funds and the frequent extension of their lifespans didn’t stir much debate, since most of the previous charges were paid by businesses rather than individuals, but consumers ought to bear in mind that ultimately they bear the cost of any charges levied on businesses.

Links and Sources:
Beijing Morning Post: 机场建设费改名民航发展基金 不公开透明