Chinese economy and industry to benefit from lower corporate tax, especially on SMEs: analysts
Staff from the tax department help a company’s finance staff (right) print a list of their company’s tax and fee reductions in Fuzhou, capital of southeast China’s Fujian Province ), on August 21, 2019. A clear listing online service of reducing taxes and fees has been promoted throughout Fujian Province after being successfully tested in Fuzhou City.Photo:Xinhua
While some companies have said they have cut costs through China’s tax and fee reduction policies and survived COVID-19 last year, some small and medium-sized enterprises (SMEs) are struggling to benefit from the policies. preferential.
More preferential policies have been put in place to further reduce the tax burden on businesses, especially SMEs. For example, the monthly value-added tax (VAT) threshold for small taxpayers will drop from 100,000 yuan ($ 15,250) in sales to 150,000 yuan, the finance ministry said at a conference on Wednesday. hurry.
“The tax reduction policy helped our company save around 30 million yuan last year during the outbreak of the epidemic, roughly equivalent to 50% of operating costs,” said Chen Chunxing, vice chairman of the Hubei Industry and Commerce Federation and chairman of Wuhan Intelligence Elevator Company in central China’s Hubei Province, the Global Times told the Global Times on Friday.
Chen said the measures taken by the government, including lowering interest rates on bank loans, had helped companies weather the storm. A year later, businesses in Hubei are back to pre-epidemic levels.
Temporary and urgent tax and fee reduction policies introduced last year to help businesses will be phased out in an orderly fashion, including exemption from employee social insurance and endowment insurance, as well as reduction of the VAT rate from 3% to 1%. , the Ministry of Finance announced on Wednesday.
“Now is the time to reverse the tax cuts without increasing the burden on the country,” Chen said. SMEs in Hubei were exempt from VAT in 2020 and benefited from preferential electricity tariffs.
Fujian Kesida Food Company, with registered capital of 3 million yuan, received tax cuts of 620,000 yuan last year. “It only took three working days between receipt of the documents and the issuance of tax breaks, which quickly increased the company’s cash flow,” media reported, quoting the head of the company.
But some SMEs see it differently. “To be honest, the tax refunds under these policies are too low for our business. It is not worth the human cost of carrying out the complicated procedures,” a director of a company told The Global Times. Wuhan-based mid-size chip design. Friday on condition of anonymity.
China has pledged to reduce taxes and fees to ease the burden on business in recent years. From 2016 to 2020, tax and fee reductions totaled more than 7.6 trillion yuan. Taxes and fees were reduced by more than 2.5 trillion yuan in 2020, according to data from the State Tax Administration.
It is even more important to keep SMEs less tax-burdened as they are the backbone of the national economy and the backbone of industries, analysts said.
“SMEs, which account for 90% of the total number of enterprises, contribute around 80% to employment, 70% to technological innovation, 60% to GDP and 50% to tax revenue in China,” Zhang said. Xiaorong, director of the Institute for Advanced Technological Research, told the Global Times on Friday.
Wang Peng, associate professor at the Gaoling School of Artificial Intelligence at Renmin University of China, said that, for example, science and technology SMEs are the main force for industrial innovation in the future. A lot of Internet companies, high-tech companies, including unicorns, have come out of SMEs.
“If SMEs can take advantage of the tax and fee reduction policy, there will be a huge dividend on China’s economy and industry development,” Wang told the Global Times on Friday.
Chinese high-tech companies are now at the stage of industrial growth, and most of them are SMEs, which account for a small proportion of GDP, but they are the mainstay of the future economy, Zhang noted.