BEIJING — The central government has stepped up efforts to lighten the load on companies by reducing both taxes and charges since the beginning of this year.
The State Council, China’s cabinet, on May 17 held an executive meeting, which made the decision to roll out new measures to lower annual corporate costs by around 120 billion yuan ($17.5 billion).
These new policies aim to reduce the costs of transportation and power use, as well as the charges for providing operational services to companies, according to a statement issued after the meeting.
Railway freight rates and the costs for freight vehicle inspections will be reduced. Provincial electricity pricing will be reformed to lower rates. Unreasonable service charges from government departments and industry associations will be canceled or lowered, the statement said.
The latest moves are clear signals that the government is determined to take precise and comprehensive measures to push forward supply-side structural reform and bolster real economic growth, according to economist Zhang Lianqi.
“Logistics and energy costs are major components of corporate costs, and thus cuts to them will translate into rises in gross profit margins,” Zhang said.
This is not the government’s first move to lower corporate costs, as various taxes and charges have long given headaches to companies and hindered their development.
The government has moved to lower corporate burdens as part of the country’s supply-side structural reform in past few years.
Since 2013, central and local authorities have eliminated more than 1,000 administrative fees. However, the issue of arbitrary charges remained prominent.
In executive meeting held this February, the State Council announced measures to clear and standardize business charges, urging departments to work out systematic, pragmatic and farsighted measures to eliminate charges.
The government’s resolve was reaffirmed during the annual parliamentary session in March, as the government work report promised to further reduce taxes and fees.
This year, the tax burden on businesses will be cut by around 350 billion yuan, and business-related fees will be cut by around 200 billion yuan so that market entities are able to truly feel the changes, the report said.
The report also listed major measures to be taken this year to make structural tax cuts deliver more results and slash nontax burdens.
An executive meeting held in mid-April was dedicated to new tax-cut measures.
Value-added tax will be simplified, more small- and micro-sized companies will enjoy income tax incentives, and pretax deductions for innovation-based tech companies will rise.
Tax incentives for venture capital firms will expand, with pretax deductions for commercial health insurance nationwide and a package of tax-cuts due to expire by 2016 extended for another three years.
After these tax-cut measures become effective, the total tax reduction will amount to more than 380 billion yuan this year.
Efforts to reduce corporate burden showed that the government is shouldering its due responsibilities to left companies out of difficulties, Yang Zhiyong with the Chinese Academy of Social Sciences said.
In clearing unreasonable charges, the country must find the crux of the problem by focusing on typical issues, Yang said.
However, the country is currently in dire need for disclosing the information about those fees and charges, he added.
“The disclosure of business-related fees around the country will make supervision by society as a whole possible, and thus become an effective way of standardizing those fees,” Yang said.