Tax cut for small business to help cushion downward economic pressure: analyst

Massive tax breaks for small businesses and the early rollout of special-purpose bonds for local governments will cushion downward economic pressure in the first quarter of 2019, a Chinese analyst said on Thursday.

On Wednesday, China announced new tax cuts for small- and micro-sized businesses, with the goal of saving them a total of 200 billion yuan ($29.46 billion) annually for three years.

There will be substantial drops in business income tax rates and a considerable increase in the tax threshold and more companies will be covered by the favorable policies, according to a statement released after an executive meeting of the State Council, China’s cabinet, chaired by Premier Li Keqiang.

The meeting urged fast implementation of the spirit of the annual Central Economic Work Conference, which was held in Beijing in December, to ensure that GDP growth stays within a reasonable range and the first quarter is smooth and stable despite downward pressure on the economy.

Shi Zhengwen, director of the Center for Research in Fiscal and Tax Law of the Chinese University of Political Science and Law, told the Global Times on Thursday that the announcement shows a sense of urgency with an emphasis on the effective implementation of major policies.

“The feeling is the government is pushing this at the very beginning of the year,” Shi said.

“Hearing the news… I felt like there was more room to breathe in the current market, which is fiercely competitive,” said Tammy Tian, an entrepreneur who runs a Beijing-based photography studio that has about five staff.

“I hope the policy will land as soon as possible, although I know it will take some time,” Tian told the Global Times.

Shi said that he expected that following the State Council executive meeting, the Ministry of Finance and the State Taxation Administration, the two executive agencies overseeing tax issues, will issue circulars as soon as the end of January or early February, paving the way for the earlier landing of the policy.

“There will be more incentives to drive down taxes and fees in 2019,” Shi said, noting that corporate income tax breaks could be available by April and value-added tax benefits by February.

Both fiscal policies will help cushion downward pressure in 2019, Shi said.