Employees with a small and micro enterprise are busy with production in Xingtai, north China’s Hebei province, Feb. 27, 2020. Amid the COVID-19 outbreak, Xingtai rolled out policies to cut taxes and administrative fees for enterprises and help them resume production. (Photo by Chai Gengli/People’s Daily Online)
By Wang Wenzheng, People’s Daily Overseas Edition
China rolled out 28 targeted and favorable tax policies in seven batches in 2020, cutting taxes and administrative fees by over 2.5 trillion yuan (about $390 billion) for companies.
Due to the COVID-19 outbreak, many small and micro businesses and self-employed people encountered difficulties in 2020, including fewer customers, rising costs, and lack of capital.
To ease their burden, Chinese taxation authorities introduced a package of measures to cut taxes and administrative fees for them last year.
For example, the validity period of policies that allow small and micro businesses to delay paying income tax and that reduce and exempt added-value tax for small-scale taxpayers were prolonged until the end of 2020, effectively stabilizing the capital flow of small and micro businesses.
Under these policies, over 90 percent of small-scale taxpayers were exempted from added-value tax; those who still needed to pay added-value tax were charged at a rate of 1 percent, down from the former 3 percent; taxpayers in central China’s Hubei province, which was once hit hard by the epidemic, were all exempted from added-value tax.
Last year, a large amount of small and micro businesses benefited from these favorable tax policies.
Xiong Meigui, who runs an automobile repair shop in Dexing, east China’s Jiangxi province, heard the news of reducing and exempting added-value tax for small-scale taxpayers when she was applying for invoice issuance at a tax service hall.
Thanks to the policy, Xiong enjoyed the 1 percent tax rate and paid merely 1,932 yuan for added-value tax of goods and services worth of over 190,000 yuan, over 3,000 yuan less than the tax payment she expected, according to Xiong.
In recent years, cutting taxes and administrative fees has been a focus in the fiscal and taxation field, said Zhu Qing, deputy head of the Chinese Tax Institute as well as a professor at the School of Finance, Renmin University of China.
China’s tax and administrative fee cuts hit a record high in 2020, Zhu noted, who believes that such taxation policies played a significant role in China’s steady GDP growth in 2020.
Small and micro enterprises are an important force in creating jobs and invigorating the national economy.
From 2016 to 2020, more than 90 percent of the newly established tax-related market entities in China were small and micro enterprises, with their number being close to 52 million.
Policies on reducing taxes and administrative fees have generated tangible dividends and enabled enterprises to put in more capital into production and operation, R&D, expanding investment and improving the welfare of employees.
“Thanks to the government’s efforts to cut taxes and administrative fees, we are able to allocate more money for scientific and technological innovation,” said Wang Zhiye, a manager with an electric machinery company in Pizhou, east China’s Jiangsu province, adding that the company initiated six R&D projects this year.
In the first half of 2020, the company gained nearly 500,000 yuan in cash flow directly from reduction in and exemption from its social security contributions, according to Wang.
Seizing the opportunity, the company launched a new casting production line worth over seven million yuan, and then received a huge number of orders for cast iron junction boxes and casting shells and secured sales revenue of more than 20 million yuan.
Last year, tax authorities at all levels in China continued to optimize technologies and services in an all-round way, and vigorously implemented “contactless” tax services.
They explored “contactless” tax payment channels including online platform, app, mailing, faxing and e-mail, greatly simplifying the tax procedures and lessening the burden of tax declaration for small and micro enterprises.
This year, the national taxation system will further consolidate the results of tax and fee reduction, and implement newly issued favorable tax policies, according to a national tax work conference held recently.