Further tax cuts planned to benefit broader groups
China’s tax authority said on Friday it is putting forward a more aggressive tax reduction plan, focusing on value-added tax and individual income tax reform, to stabilize private enterprises’ investment and fuel consumption.
“We will propose a largerscale tax cut and fees reduction policy as soon as possible,” said Wang Jun, director of the State Taxation Administration, in an interview with China Daily on Friday.
The plan should be straightforward to implement, and would benefit a broader group of individuals and businesses, he said. Once introduced, the policy would further cut corporations’ tax bill, especially for tech startups, and small and microenterprises, he added.
“In the meantime, we will work with other government departments to improve the specific individual income reduction plan after seeking public opinion,” Wang said.
With the effects of the tax cuts predicted to set in during the remaining two months of the year, the total tax reduction amount is forecast to exceed 1.3 trillion yuan ($187 billion). This is expected to lead to a continued slowdown of tax income growth to a rate similar to annual GDP growth, he said.
Experts forecast that such proactive fiscal policy will continue next year, as downward economic pressure on the world’s second-largest economy could rise. They added overall tax cuts in 2019 would be no lower than this year’s.
Bai Jingming, vice-president of the Chinese Academy of Fiscal Sciences, said the next step for value-added tax (VAT) reform is clear — to further reduce VAT brackets from three to two.
“It will be introduced in the very near future,” Bai said.
He predicted the upcoming tax cut effects from this measure could be even stronger than the results achieved so far this year.
“The taxation administration also plans to elicit suggestions on lowering corporations’ social security premium rate, to ensure a real cut to their operating costs,” Wang said.
For private companies facing financing difficulties, further tax policies could be introduced to ease their burden, and some tax payments could be delayed.
In terms of supporting financial institutions’ lending to small and microenterprises, taxes on financial institutions’ interest income and financing guarantee income will be waived, he added.
According to Wang, beneficial policies resulted in a total tax cut of 143.7 billion yuan for small and microenterprises in the first three quarters of this year, up 41.3 percent year-on-year. For 732 large-sized private companies, under the SAT statistics system, tax cuts reached 71.4 billion yuan, up by 19.3 percent year-on-year.
Through the VAT reform, about 238.6 billion yuan in taxes had been reduced by the end of September, according to data released by the administration.
Influenced by the tax cut policies, the country’s fiscal revenue growth is likely to slow further in the fourth quarter and next year, according to Wen Zongyu, director of the State-owned Research Institute for Fiscal Science of the Finance Ministry.
Wang Jun, director of China’s State Administration of Taxation