Home » Opinion » Chinese Views
Tax overhaul a critical step in supply-side reforms
Print Edition
The myth about China’s slower growth has often clouded people’s judgment about the quality of its economy, as we all tend to believe faster is better, and an economy losing steam means it is on the brink of collapse.
Most China watchers still need time to realize that the current transitional period of the world’s second largest economy encompasses massive reforms that incubate fresh impetus for robust growth in the years to come.
A good example is a recent announcement by China’s Ministry of Finance to set a May 1 deadline for completely replacing the country’s business tax with a value-added tax (VAT), cutting an estimated 500 billion yuan (US$773 billion) of tax for corporations by the end of 2016.
“This major favorable policy will boost China’s attractiveness as a hot bed for investment and innovation,” said Guo Shengxiang, dean of the Australian think tank Academy of APEC Creative Finance, explaining that the lessening of the tax burden will be beneficial for many market players, and will give a powerful impetus to the promotion of market-oriented investment and technology upgrade.
Such a bold step, especially in the services sector, is not just a short-term fiscal stimulus, but a far-reaching reform measure that will remove economic distortions and improve the business environment over the long run.
The Chinese government has long imposed a VAT on tangible goods, but services are instead subject to business tax, which is imposed on a firm’s sales, including costs. Such a crude levy is effectively a form of double taxation for service-sector firms.
In January 2012, authorities extended the scope of the VAT levy to include a variety of services, and Shanghai became the first city to operate pilot reform projects leading to full-scale application of the VAT system. Now the central government wants to expand these projects nationwide; covering all industries and fields, including construction, real estate, finance and consumer services.
An across-the-board replacement with the VAT will lower tax burdens on all industries, streamline tax-paying processes and benefit small businesses in particular, encouraging more investment, entrepreneurship and innovation.
Besides, Dan Lange, Global Managing Director of Tax and Legal at Deloitte, said in an earlier interview with Xinhua that such a reform could have global significance.
The VAT reform will help align China’s tax policies with international standards, and allows enterprises to expand their businesses in a more unified tax environment, which will mean a remarkable improvement in the business environment, he said.
The VAT reform constitutes only part of China’s reform package. Since May 2013, China has issued more than 20 policies to promote entrepreneurship and innovation, including measures to expand market access, lower taxes and fees, and broaden financing channels.
China’s economy has reached a crucial point where supply-side reform is imperative. The old growth impetus has been gradually weakening and earlier policies to stimulate development have become less effective. The government is expected to push through reforms based on rising domestic demand, including streamlining administration and encouraging innovation, to guide China’s economic transition in the right direction.
The authors are Xinhua writers.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
