Main beneficiaries of tax breaks, smaller firms seen as key to shoring up growth
China’s sustained efforts in tax breaks and value-added tax credit refunds are bringing concrete benefits to market players and this is expected to generate strong growth momentum for economic recovery for the rest of the year, officials and experts said.
Their comments came after the State Taxation Administration said on Friday that by Thursday, the country’s total amount of newly increased tax cuts, VAT credit refunds and tax payment deferrals had exceeded 2 trillion yuan ($297 billion).
Rong Hailou, a spokesman for the administration, said at a news conference that the country’s tax and fee cuts totaled 244 billion yuan during the first four months.
Rong said small and micro-sized businesses remain the main beneficiaries in this year’s policy efforts of tax breaks, deferrals and tax credit refunds. Between April 1－when the country’s VAT credit refund was enacted－and June 9, outstanding VAT tax refunds to micro, small and medium-sized businesses have been completed. Among all tax credit refund receivers, micro and small businesses take up 94.9 percent and have received 703.9 trillion yuan.
Preferential value-added tax policies have also helped smaller taxpayers save 33.5 billion yuan, he said. In addition, a total of 428.9 billion yuan of tax payment deferrals have been made to micro, small and medium-sized enterprises in the manufacturing sector.
He also said that from a geographical point of view, the scale of VAT credit refunds in East China is notably larger with its total amount of tax refunds reaching 739.1 billion yuan.
A survey conducted by State tax authorities shows that most of the liquidity freed from the tax credit refund scheme has been utilized to expand production, technological research and development, and salary payments, and these refunds have greatly helped businesses with liquidity, said Xie Wen, also an official from the State Taxation Administration.
Figures from the department show that in May, purchasing spending made by businesses that have benefited from the tax credit refund scheme increased by 10.9 percent year-on-year, about 3 percentage points higher than the first quarter.
The scale of the VAT credit refund scheme has recently expanded to seven more industries on top of the previous six and will generate some 140 billion yuan of refunds. Xie said that competent tax authorities will step up efforts in implementing new refunds and make sure that all the newly generated tax refunds will be proceeded by the end of July.
Zhang Lianqi, vice-president of the China Taxation Society, said that the robust and accelerated efforts in tax refunds are to effectively sustain market players, and that “to sustain market players is to anchor market expectations and protect the resilience of the Chinese economy.”
Li Xuhong, director of the Institute of Finance and Taxation Policy and Application at Beijing National Accounting Institute, said that the result of the survey shows tax credit refunds have delivered notable benefits to competent industries, improving their operational status, and enhancing market vitality.
“Now that the refund scheme has been extended even wider, this will help the policy to shape economic impact in scale, hence drive the country’s growth. In addition, speeding up such policy implementation will help these policies to deliver outcomes at the earliest possible date,” Li said.