2019 Tax and Fee Cuts in China Expected to Exceed 1.5 Trillion Yuan


Domestic analysts expect the pursuit of more active fiscal policy by Beijing to lead to over 1.5 trillion yuan in tax cuts in 2019.

Shi Zhengwen (施正文), chair of the Fiscal and Tax Law Research Centre at the China University of Political Science and Law, said to Yicai that he expects considerable downward pressure on the Chinese economy in 2019, and the subsequent maintenance of active fiscal policy that will focus on tax and administrative fee reduction.

Shi expects next year’s tax and fee reductions to potentially lie within the 1.5 trillion – 2 trillion yuan threshold.

Zhao Quanhou (赵全厚), chair of the CRIFS Financial Research Centre (中国财政科学研究院金融研究中心), also expects 2019 tax and fee cuts to reach 1.5 trillion yuan.

The State Council has already confirmed that China’s three-grade value added tax system (16%, 10% and 6%) will be converted into a two grade system, and that the value added tax rates will be reduced.

Shi Zhengwen said that the reduction in China’s value added tax will not only be a reduction in tax rates, but will also encompass the creation of a value-added tax deduction chain that will permit full deductions by upstream and downstream enterprises, as well as an expansion in the scope and eligible industries for value-added tax refunds, in order to further reduce pressure on enterprise funds.

Shi also expects small and micro-enterprises and tech-start ups in China to enjoy widespread tax exemptions in 2019.

With regard to personal income tax, 2019 will see the official launch of six new additional deductions following an increase in the minimum personal tax threshold to 5000 yuan from 3500 yuan in 2018, alongside an expansion in the low taxation rate scope .

Ministry of Finance data indicates that the increase in the minimum tax threshold to 5000 yuan will achieve an annual reduction in personal income tax in China of up to 320 billion yuan, and leave 120 million Chinese citizens exempt from levies.

Beijing has also confirmed a reduction in social security fee rates in 2019 in order to ensure that the social security burden on enterprises continues to decline, with the Ministry of Human Resources and Social Security currently leading the research and drafting of detailed plans for cuts to aged care welfare fee rates.

Domestic experts expect the conversion of social security fee payments into tax levies administered by China’s taxation authorities to lead to a short-term reduction of five percentage points in the social security fee rate, which currently stands at 37%.

In the long-term the social security fee rate is expected to be kept at between 20 – 25%.