Chinese government departments lost US$2.2 billion last year through corruption, poor tax methods and bad land management, the National Audit Office said in a report published yesterday.
About 5.5 billion yuan (US$685 million) in central budget funds was lost through embezzlement, concealing revenues, fabricating expenditures and other forms of abuse, the office said in its annual report for last year.
Another 6.65 billion yuan (US$830 million) was lost through poor tax collection methods, the report said, according to Xinhua news agency.
The report did not name any of the 48-ministerial level departments investigated but said 18 had embezzled a total of 702 million yuan of funds to build office buildings or to use for personal expenditure.
Seven departments also secured 360 million yuan worth of funds by concealing revenues or fabricating expenditures.
Another nine central government departments embezzled a total of 176 million yuan by fabricating details about the number of projects and subordinate units under their control.
The money was then paid to staff.
The audit also said 87 economic development zones in six municipalities such as Shanghai, and provinces such as coastal Zhejiang and Jiangsu, were to blame for poor tax collection that resulted in the losses of 6.65 billion yuan.
Special economic development zones, many of which host foreign-funded companies, were attacked for offering unwarranted preferential policies to attract capital, according to a China Daily report.
Separately, the audit found that the government had allotted land to investors at ultra low prices, causing the state to lose 5.65 billion yuan (US$705 million) in revenues.
Audit office chief Li Jinhua identified 12 cases involving 25 people as subject to an official judicial probe, the official Xinhua news agency said.
His report said 176 people had been punished last year, compared with 762 in 2004, and this reflected "enhanced supervision by the government departments themselves."
Corruption occurred due to defects in the system rather than officials' poor moral standards but more reform was needed to improve China's budgetary practices, said Li, singling out the Ministry of Finance and National Development and Reform Commission for loopholes in their procedures.
Many experts agree with Li and recently more officials have called for reforms to the nation's secretive and top-down budgetary process.
At a financial conference in Beijing on Tuesday Lou Jiwei, executive vice minister of finance, said China had to reform its opaque budget laws.
"We should establish and improve the fiscal and tax mechanisms [to] match the responsibilities of all levels of government and straighten out fiscal relations," he said.
Lou's comments come after state media reported last week that China would amend its decade-old budget laws to better regulate the use of government funds, especially extra-budgetary funds.
China's budget law requires each of the nation's five tiers of government to prepare their own budgets but provincial administrations carry about 70 percent of the fiscal burden, forcing many departments to turn to creative accounting.
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