Tax thresholds raised sharply
By Lydia Chen |
November 1, 2011, Tuesday
|
Print Edition
Print Edition
CHINA has taken another major step to realize its "structural tax cuts" vow made by Premier Wen Jiabao as the thresholds of value-added tax and business tax will be raised sharply from today.
The move came less than a week after Wen said China should take measures such as "structural tax cuts" to promote stable growth while fine-tuning its anti-inflation policies in targeted industries like small- and medium-size firms as the government acts to support companies saddled by rising costs and slowing economic growth.
The threshold for VAT will be raised to 5,000 yuan (US$787) to 20,000 yuan from the current 2,000 yuan to 5,000 yuan from today while the minimum for corporate income tax will climb to 5,000 yuan to 20,000 yuan from the existing 1,000 yuan to 5,000 yuan.
The specific threshold varies by geographical area and the specific tax rate varies by industry, the finance ministry said.
The rise in the tax threshold aims to ease the financial burden faced by start-up firms, Liu Jianwen, a law professor at Peking University, said on his Sina Weibo account yesterday.
The government's move was welcomed by an analyst at Southwest Securities Co in Wenzhou, the cradle of China's private business, who described it as "a good sign from the government."
"This is a promising start that hopefully can lead to a comprehensive lower tax rate for all industries," the analyst, who did not want to be identified, added.
Lu Zhengwei, chief economist with the Industrial Bank, said that "Chinese companies' tax burden have been excessively heavy in recent years, and the tax-cut policies come just in time. But it's more important to have the policies solidly implemented."
Last week, the State Council, or Cabinet, unveiled a trial scheme in Shanghai to lower corporate taxes in local transport firms and some service companies which is slated to start next year to help ease the tax burden. These companies in the city will have their business tax replaced by VAT from January 1 next year.
The trial scheme is likely to eventually be expanded across the country, according to the finance ministry's statement.
The move came less than a week after Wen said China should take measures such as "structural tax cuts" to promote stable growth while fine-tuning its anti-inflation policies in targeted industries like small- and medium-size firms as the government acts to support companies saddled by rising costs and slowing economic growth.
The threshold for VAT will be raised to 5,000 yuan (US$787) to 20,000 yuan from the current 2,000 yuan to 5,000 yuan from today while the minimum for corporate income tax will climb to 5,000 yuan to 20,000 yuan from the existing 1,000 yuan to 5,000 yuan.
The specific threshold varies by geographical area and the specific tax rate varies by industry, the finance ministry said.
The rise in the tax threshold aims to ease the financial burden faced by start-up firms, Liu Jianwen, a law professor at Peking University, said on his Sina Weibo account yesterday.
The government's move was welcomed by an analyst at Southwest Securities Co in Wenzhou, the cradle of China's private business, who described it as "a good sign from the government."
"This is a promising start that hopefully can lead to a comprehensive lower tax rate for all industries," the analyst, who did not want to be identified, added.
Lu Zhengwei, chief economist with the Industrial Bank, said that "Chinese companies' tax burden have been excessively heavy in recent years, and the tax-cut policies come just in time. But it's more important to have the policies solidly implemented."
Last week, the State Council, or Cabinet, unveiled a trial scheme in Shanghai to lower corporate taxes in local transport firms and some service companies which is slated to start next year to help ease the tax burden. These companies in the city will have their business tax replaced by VAT from January 1 next year.
The trial scheme is likely to eventually be expanded across the country, according to the finance ministry's statement.
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