Tax cuts and fee reduction to tackle economic downward pressure

‍Editor's note: Liu Chunsheng is an associate professor at The Beijing-based Central University of Finance and Economics and deputy dean of The blue Source Capital Research Institute. The article reflects The expert's opinion, and not necessarily The views of CGTN.

On April 1, 2019, China's massive value-added tax cuts and fee reduction took effect. The VAT rate in The manufacturing sector decreased from The current 16 percent to 13 percent and The VAT rate in transportation and construction industries dropped 1 percentage point from The current 10 percent.

Moreover, Chinese central government decided to furTher expand The scope of The input tax deduction, such as to include passenger transport services in The deduction, and to change The input tax paid for real estate from a two-year deduction to a one-time full deduction, so as to increase The current deductibility of taxpayers.

The central government also announced that in all industries There will be only tax cuts and no increases.

A taxpayer service hall in Handan, Hebei Province, April 1, 2019. /VCG Photo

The amount of tax withholding newly added by taxpayers after The implementation of The policy shall be refunded in accordance with The relevant provisions.

China will also adjust The export rebate rate of some goods and services and The deduction rate applicable to purchasing agricultural products. All of These measures aim to lower burdens on enterprises and boost The real economy.

On March 5, Chinese Premier Li Keqiang pointed out in his government work report to National People's Congress deputies during China's annual Two Sessions that in 2019, China faces more complex and severe environment, risks and challenges from both domestic and overseas. Under such circumstances, policy measures should balance The relationship between stable growth and risk prevention, which is conducive to stable expectation, steady growth, and restructuring, and at The same time, They should not just focus on The present but damage long-term development and create new risks.

On The oTher hand, They should deal with The relationship between government and market well and rely on reform and opening-up to stimulate The vitality of market players. He announced to furTher cut down The tax and fees to reach such goals.

The 13th CPPCC National Committee is holding a press conference on China's business environment. /VCG Photo

The tax cut and fee reductions are major measures to lighten The burden of enterprises and stimulate market vitality and will enhance development potential. It is an important reform to improve The tax system and optimize The pattern of income distribution and is important choices for macroeconomic policies to support stable growth to ensure employment and adjust The structure.

According to The calculation, it is expected to cut 2 trillion yuan in taxes and more than 30 million enterprises especially those mall and micro enterprises, which are The main force to absorb employment in China will benefit from The moves.

The measures certainly will help to tackle The downward pressure of China's real economy sectors such as The manufacturing industry which is The solid base of China's development. The obvious reduction of corporate contributions to social insurance will also bring hundreds of billions of yuan in burden relief. In addition to The newly-released Foreign Investment Law, lower taxation will also favor foreign investors to do business in China.

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