Tax re­forms reap pos­i­tive re­sults for eco­nomic growth

China Daily (Canada) - - BUSINESS - By LI XIANG, CAI XIAO andWANG YANFEI

China’s ef­fort to re­duce the cor­po­rate tax bur­den has played a pos­i­tive role in boost­ing eco­nomic growth, ex­perts said on Wed­nes­day, call­ing on the gov­ern­ment to fur­ther deepen tax re­form to cush­ion the po­ten­tialimpact ofUSPres­i­dent Don­ald Trump’s pro­posal for mas­sive cor­po­rate tax cuts.

Hu Yi­jian, a tax pro­fes­sor at Shang­haiUniver­sity of Fi­nance and Eco­nom­ics, said that China’s tax poli­cies have had a sub­stan­tial im­pact, as shown by the scale of the tax cuts and the strong re­bound of the econ­omy in the first quar­ter.

It has been a year since China ex­panded the im­ple­men­ta­tion of value-added tax re­form to all in­dus­tries. By the end of April, to­tal tax cuts un­der the re­form are ex­pected to reach 680 bil­lion yuan ($98.7 bil­lion), ac­cord­ing to the coun­try’s tax au­thor­ity.

“The value of tax cuts com­bined with fee re­duc­tions is ex­pected to reach 1 tril­lion yuan this year, high­light­ing the de­ter­mi­na­tion of the gov­ern­ment to re­duce cor­po­rate bur­den and to boost the econ­omy,” Hu said.

Ex­perts also called on the gov­ern­ment to fur­ther deepen tax re­forms, ex­pand the scale of tax cuts and pro­mote ad­min­is­tra­tive re­form to im­prove gov­ern­ment ef­fi­ciency to deal with pos­si­ble changes in the international tax en­vi­ron­ment as a re­sult of the mas­sive tax cut pro­posal by US Pres­i­dent Trump.

Liu Xuezhi, an an­a­lyst at Bank of Com­mu­ni­ca­tions Co, said that Trump’s tax cut plan, if ap­proved by the US Congress, could re­shape the com­pet­i­tive­ness of ma­jor economies in the world and China should con­tinue to deepen its own tax re­form to main­tain its com­pet­i­tive­ness.

Wang Jun, head of the State Ad­min­is­tra­tion of Taxation, has vowed to im­prove the ef­fi­ciency of China’s tax regime.

Inaspeechatthe­fourth­meet­ing of the OECD Global Fo­rum on Value-Added Tax, Wang said fu­ture re­form will en­sure that in­dus­tries in all sec­tors will not face a higher tax bur­den.

Last month, the State Coun­cil in­tro­duced a string of mea­sures to re­duce the cor­po­rate tax bur­den, in­clud­ing sim­pli­fy­ing the VAT rate sys­tem into three tax rates and low­er­ing the rates for agri­cul­tural prod­ucts, nat­u­ral gas and­someother in­dus­tries from 13 per­cent to 11 per­cent, which will be ef­fec­tive on July 1.

Other mea­sures in­cluded ex­pand­ing cor­po­rate in­come tax ben­e­fits to more small firms and in­creas­ing the de­ductible share of re­search and devel­op­ment from 50 per­cent to 75 per­cent. The gov­ern­ment es­ti­mated that these mea­sures will re­duce the tax bur­den by about 380 bil­lion yuan.

The gov­ern­ment’s tax cut mea­sures have seen pos­i­tive re­sponse from the business com­mu­ni­ties in China.

“The ca­ter­ing in­dus­try is ben­e­fit­ing a lot from the re­form be­cause we can use spe­cial in­voices for dec­o­ra­tion fees and pro­cure­ment to deduct in­come tax,” said Zhu Yul­ing, head of the Bei­jing Hu­a­tian Ca­ter­ing Group Corp.

“We re­duced our tax pay­ments by about 10 mil­lion yuan last year and we will use the­money to boost em­ploy­ees’ salaries,” said Zhu.

SongQing, CEOof high-tech startup com­pany Bei­jing Pilos­mart Tech­nol­ogy Co Ltd, said the value-added tax re­form largely re­duced the com­pany’s tax bur­den. Song said the com­pany’s an­nual rev­enue was about one mil­lion yuan and it had to pay more than 100,000 yuan in business tax, and now costs can be off­set against tax and the com­pany only pays about 10,000 yuan.

Con­tact the writ­ers at lix­i­ang@chi­nadaily.com.cn

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