Next Round of Chinese Tax Cuts Will Focus on Hi-Tech Manufacturing

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China’s state-owned media has indicated that the next round of tax reductions will focus on the further replacement of business taxes with value-added taxes, as well as a reduction in the tax burden for hi-tech manufacturing companies.

A new report from Economic Information Daily says that “specific measures for the next round of tax reductions and fee cuts are already brewing, from the central to local government.”

According to the report the joint release of the “Notice on Suspending the Levying of Emissions Fees and Other Administrative Enterprise Fees” (关于停征排污费等行政事业性收费的通知) by the National Development and Reform Commission and the Ministry of Commerce marks the “first shot” in the 2018 round of tax cuts and fee reductions.

The Shaanxi province government and other local authorities in China are also making preparations to reduce corporate taxes, with the focus expected to be on hi-tech manufacturing.

“It is expected this year’s tax reductions will continue to focus on the real economy, with the advanced manufacturing sector in particular expected to be the focal point of cuts.”

Jiang Zhen (蒋震), a researcher with the National Academy of Economic Strategy, said to Economic Information Daily that “this year’s tax and fee reductions will be more precise, and will be directed at resolving issues in relation to social and economic transition.

“Overall, 2017 economic growth and fiscal revenues were better than expected, and the economy is rebounding.

“We need to use tax and fee reductions to consolidate stabilisation of the economy, and I expect that this year their vigour will not reduced.

“The most important thing is to invigorate enterprise, especially emerging industries and hi-tech enterprise.”

China’s preferential tax policies for the support of enterprise and innovation reportedly reduced the tax burden on companies by more than 500 billion yuan (USD$78.14 billion) in 2017.

Hi-tech enterprises saw their company income tax cut to 15%, for a total tax reduction of over 240 billion yuan, while preferential tax policies to support micro-enterprises reduced their tax burden by over 160 billion yuan.

Official figures indicate that over the past five years the replacement of China’s business tax with value-added taxes has reduced the tax burden for companies by nearly 2 trillion yuan.

Wang Jun (王军), head of China’s State Administration of Taxation, said at the National Taxation Work Meeting that the replacement of China’s businesses taxes with value-added taxes is “increasing the vigour and effectiveness of active fiscal policy, and a key measure for advancing China’s supply-side structural reforms.”

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