Tax reforms reap positive results for economic growth
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.
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