China is expected to unveil a new round of tax cuts within the year which industry insiders believe will benefit the small business and tech start-ups more, according to the Xinhua-run Economic Information Daily on Wednesday.
Relevant departments are discussing and formatting a plan for the new round of tax cuts, said the report.
In terms of the value-added tax (VAT), China has been moving towards the objective of improving the tax system and reducing the tax burden, from the comprehensive implementation of the pilot reform of replacing business tax with VAT, to the deepening of the VAT reform, and to the future move of simplifying tax brackets of the VAT.
Starting from May 1, the VAT rate was lowered from 17 percent to 16 percent for manufacturing and some other industries, and from 11 percent to 10 percent for transportation, construction, basic telecommunication services and farm produce.
The VAT rate now contains three brackets, namely, 16 percent, 10 percent and 6 percent.
The launch of a larger and predictable tax cut plan will help stabilize market confidence, said Yang Zhiyong, a senior researcher of the National Academy of Economic Strategy of the Chinese Academy of Social Sciences (CASS).
In his view, the VAT rates of 16 percent and 10 percent each can be lowered by 2 percent and the rate of 6 percent can be lowered to 5.5 percent. In addition, the corporate income tax also has room for further tax rate cuts.
The tax cut policies in the next step should focus on the inclusive tax cut. While improving the tax system, efforts have to be made to reduce the tax burden to create fair competition for enterprises, said Liu Shangxi, director of Chinese Academy of Fiscal Sciences.
The tax cuts and fee reductions are of positive significance especially to small business and tech start-ups. On the one hand, due to the small scale of tax revenue contributions by them, the tax cuts for them will bring less pressure on fiscal revenue. On the other hand, the number of small and micro enterprises is large and the tax cuts will exert wide impacts, which will have a positive effect in easing employment and cash flow pressure, according to Li Xuhong, director of a fiscal policy and application institute of the Beijing National Accounting Institute.