$73b targeted for VAT relief in 2016
The goal for China’s ongoing nationwide valueadded tax reform is to reduce the tax burden for enterprises by 500 billion yuan ($73 billion) by the end of this year.
The amount was announced on Tuesday at a State Council executive meeting presided over by Premier Li Keqiang, who heard a report on the progress of the VAT expansion.
The VAT reform, which is designed to reduce the tax burden for service industries and boost industrial upgrading and innovation, has extended China’s valueadded tax since May to the construction, real estate, finance and consumer services sectors
VAT reform is playing a crucial role in China’s effort to ensure steady economic growth and structural adjustment, Li said.
Ministry of Finance figures show that between May and October, taxes continued dropping in the newly added sectors. During the past six months, the newtax plan has helped enterprises in those sectors to save a total of 96.5 billion yuan in taxes.
The tax burden has been reduced or leveled off for 98.5 percent of business owners, the figures show.
“Our goal through VAT reform is to better invigorate the market and boost the modern service industry,” Li said. “The steady progress of tax cuts reduces the burden for enterprises and will help create enormous employment opportunities.”
The premier has placed great emphasis on the progress of the reform, requiring departments to develop tailored policies for various sectors to boost innovation and industrial upgrading.
In the past six months, 530,000 taxpayers in the construction, real estate, finance and consumer service industries have benefited from the reform,
Our goal ... is to better invigorate the market and boost the modern service industry.” Premier Li Keqiang
according to the ministry.
Problems remain, however. Sectors such as finance, technology and tourism might need tailored tax assessment measures. Additionally, some companies have not made full use of the new VAT plan.
Tax assessment measures will be further tailored in the finance and construction sector, as well as for technological transfers.
The government will also provide guidance to business owners on how to understand and best use the new tax policy so they can ease their tax burden. The government will also improve tax collection methods.
“Reducing taxes will not only benefit enterprises, but will also bring greater goods for the country in the long run,” Li said. “This is part of our positive fiscal policy, instead of giving policy support to particular industries and returning to the planned economy.”
The meeting also decided on Tuesday that distribution of VAT revenues will be balanced between the country’s eastern regions and central and western regions.
Benny Li, CEO and president of Huaxia Finance Equity Investment Management Co, said, “The full introduction of VAT allows us to plan ahead and manage our accounting risk, which has a direct impact on our profitability and sustainability.”