At a national tax work conference on 28 January, China’s tax authorities announced a stepped‑up push in 2026 to deepen tax‑system reform, sharpen the tax structure and enlarge local governments’ fiscal room by making fuller use of legally authorised local taxes. The plan pairs fiscal reforms with social‑insurance moves: national pooling of basic pensions, provincial pooling of basic medical schemes, incentives for new‑form workers to join employee insurance, and acceleration of long‑term care insurance pilots.
The measures are best read against a longer, familiar problem in China’s public finances: local governments carry a heavy share of spending responsibilities yet face volatile and constrained revenue streams, historically leaning on land sales and one‑off measures. Expanding the use of local tax instruments is intended to diversify and stabilise subnational revenues, while centralised pension pooling and provincial medical pools aim to reduce regional disparities in social spending and create more predictable long‑term fiscal commitments.
For the country’s large population of informal and gig workers, the announcement signals an explicit policy pivot. Encouraging new‑employment forms to access employee insurance could close coverage gaps that have widened with digital platforms and short‑term contracts, improving household resilience but also raising questions about contribution rates, administrative integration and compliance enforcement across jurisdictions.
Introducing or expanding long‑term care insurance addresses a pressing demographic challenge: rapid population ageing is already straining pension and health systems and weighing on household finances. Piloting and accelerating long‑term care arrangements will require sustained fiscal support; the central and provincial governments will need to decide how much cost is shared and whether new local levies will be deployed to fund benefits.
For businesses and investors, the reforms are a mixed signal. Better‑funded social safety nets can underpin domestic consumption and reduce macro fragility, but broader use of local tax powers opens the possibility of more varied local levies or higher effective tax burdens in some places. The implementation choices—whether through new local tax types, reallocation of tax bases, or tighter enforcement—will determine the economic impact and the balance between revenue mobilisation and growth incentives.
The next phase will be technical and political: drafting specific measures, running pilots, and coordinating across ministries and provincial governments. Observers should watch for concrete legislative moves, pilot locations, and changes to tax administration and transfer mechanisms, which will reveal whether this is a modest fiscal tuning or the start of a deeper reallocation of revenue authority within China’s fiscal system.