More tax re­forms on agenda: Min­is­ter

China Daily (Canada) - - BUSINESS - By WEI TIAN weitian@chi­nadaily.com.cn

China will bring more le­git­i­macy and fair­ness to its taxation sys­tem in a bid to en­sure the na­tion’s eco­nomic health, Fi­nance Min­is­ter Lou Ji­wei said on Thurs­day. Ex­pand­ing pi­lot re­form to re­place the busi­ness tax with a value-added tax, in or­der to avoid du­pli­cate taxation and to en­cour­age in­dus­trial up­grad­ing, will re­main a ma­jor task this year, Lou told re­porters on the side­lines of the an­nual ses­sion of the Na­tional People’s Congress in Bei­jing.

The trial, which started with trans­port and the ser­vice sec­tors, grew to in­clude rail­way, post and tele­com ser­vices in Jan­uary, ac­cord­ing to theGovern­men­tWork Re­port de­liv­ered by Pre­mier Li Ke­qiang onWed­nes­day.

Leg­is­la­tion for an en­vi­ron­men­tal tax and property tax also is on the agenda, Lou said, while re­veal­ing that au­thor­i­ties also are con­sid­er­ing mod­i­fy­ing the re­sources tax and con­sump­tion tax.

Apart from high­light­ing the need for leg­isla­tive ap­proval of any new mod­i­fi­ca­tions to the tax sys­tem, Lou­said tax reg­u­la­tions will grad­u­ally be con­verted into newlaws.

Only three of the cur­rent 18 tax items in China were passed by leg­is­la­tion, while the rest are reg­u­la­tions set by the State Coun­cil, China’s Cab­i­net, which was granted that author­ity by theNa­tional People’s Congress in 1985.

“This has caused ir­reg­u­lar­i­ties in our taxation sys­tem, such as un­ap­proved tax in­cen­tives of­fered by lo­cal gov­ern­ments,” Lou said.

He said the cen­tral govern­ment will step up ef­forts to re­move these tax in­cen­tives. “We must en­sure that re­sources are al­lo­cated ac­cord­ing to the mar­ket, not pref­er­en­tial poli­cies,” he said.

Bai Chon­gen, deputy di­rec­tor of the Eco­nomic Man­age­ment School at Ts­inghua Univer­sity, said al­though tax leg­is­la­tion will be a lengthy process com­pared with State Coun­cil reg­u­la­tions, it also is in­evitable.

“There is no short­cut on the road to re­form,” he said.

China’s macro tax bur­den as mea­sured by the pub­lic rev­enue-to-GDP ra­tio was 22.7 per­cent in 2013. Many are ex­pect­ing that the promised tax re­forms may ease the tax pres­sure, but they might be dis­ap­pointed.

Yang Zhiy­ong, head of fis­cal sci­ence re­search at the Chi­nese Academy of So­cial Sci­ences, said the im­pact of such things as VAT re­form on com­pa­nies will dif­fer ac­cord­ing to the com­pany.

“The aim of VAT re­form is not to in­crease the over­all tax bur­den,” Yang said.

As for con­sump­tion tax, Jia Kang, head of the In­sti­tute for Fis­cal Sci­ence Re­search un­der the Min­istry of Fi­nance, said the re­form aims to boost rev­enue for lo­cal gov­ern­ments and en­cour­age lo­cal of­fi­cials to think more about stim­u­lat­ing con­sump­tion than at­tract­ing in­vest­ment.

Re­form­ing the re­sources tax, Jia said, will in­volve as­sess­ing re­sources such as coal on a value base rather than vol­ume base, which may raise the amount of taxation.

At the press con­fer­ence, Lou ruled out the pos­si­bil­ity of rais­ing the thresh­old for per­sonal in­come tax. It now stands at 3,500 yuan ($570) a month, but he said there will be a com­pre­hen­sive plan for tax de­duc­tions tak­ing into ac­count fam­ily liv­ing ex­penses.

Lou also hinted that cer­tain flawed tax poli­cies, such as the 20 per­cent in­come tax levied on a fam­ily’s property sales, which has driven up the num­ber of di­vorce cases for the pur­pose of tax avoid­ance, should be mod­i­fied or can­celed.

Re­gard­ing over­all eco­nomic growth goals set for this year, Lou called for a more com­pre­hen­sive un­der­stand­ing of the tar­get in­stead of just fix­at­ing on the 7.5 per­cent fig­ure.

The pre­mier an­nounced on Wed­nes­day that the coun­try will tar­get an un­changed 7.5 per­cent GDP growth for 2014, while vow­ing to keep in­fla­tion at around 3.5 per­cent and cre­ate 10 mil­lion more ur­ban jobs to en­sure the reg­is­tered ur­ban un­em­ploy­ment rate does not rise above 4.6 per­cent.

Not­ing that the re­port used “around” for those tar­gets, Lou said a 7.3 per­cent or 7.2 per­cent growth rate can still be con­sid­ered within that range.

GDP growth, in­fla­tion and em­ploy­ment all are key fac­tors that should be taken into ac­count when as­sess­ing eco­nomic con­di­tions, Lou said.

“Whether the fi­nal read­ing is a touch more or less than the 7.5 per­cent tar­get is not that im­por­tant. Em­ploy­ment is the key,” he added. Xin­hua con­trib­uted to this story.

Unit: tril­lion yuan 2013 2012 2011 2010 2009 2008 Unit: per­cent (y-o-y) 2008 2009 2010 2011 2012 2013

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