Chinese small businesses to benefit from fresh tax cuts

China’s newly released government work report signals that the country is set to slash nearly 2 trillion yuan （about 0.30 trillionU.S. dollars) in corporate taxes and fees. It will be a big fiscal push that will drive tens of millions of small companies that contribute to over 60 percent of the country’s GDP.

InChina’s northeastern city of Shenyang, we found Li Yan, who runs a household appliance trading company. The retailer hails the reductions in taxes and fees as a lift to his small-profit business.

"We will be able to make more net profits to expand my business, hire more workers, and provide better staff welfare," said Li.

With an annual taxable income of less than 1 million yuan (about 149,000 U.S. dollars), the company's tax burden has dropped 5 percent since early 2019 thanks to a new preferential policy. Their financial executive Yang Yongli told CGTN that VAT threshold has also been raised to benefit more taxpayers. "Since last May, our value-added tax (VAT) rate dropped one percent, down to 16 percent. As for fees, we expect to save more on pension insurance," Yang added.

A small business owner calculates the profit. / CGTN Photo

And now a new round of Chinese tax cuts is coming along, focusing on transportation and the manufacturing sector. More fee reduction measures will further lower the costs of entrepreneurship and innovation.

Professor Zhao Guizhi, a fiscal expert from Liaoning University, saw a policy shift towards structural tax cuts which will deliver more benefits to enterprises of different industries, scales and production chains. She predicted that the move could better address woes of small businesses in question, stimulate consumption and enhance national strength.

China plans to cut the VAT rate for manufacturing and transport sectors. /CGTN Photo

While there's still room for improvement, experts believe more tax incentives are on the horizon for later in the year. Meanwhile, tax cuts are just part of the massive project to save SMEs from economic hurdles. The Chinese government will also make efforts to create a better business environment and tackle the financing difficulties for small enterprises.

That may be the key to comprehensively promoting small businesses and injecting vitality into the national economy.