The State Council executive meeting introduced new measures to cut taxes and administrative fees to reduce the costs for enterprises on June 7, and this move is expected to save them one trillion yuan ($147.1 billion) this year.
Experts spoke highly of the government’s move, saying it not only demonstrates governments’ continuing efforts to serve the real economy, but also helps push forward economic upgrades and transformation.
Data from the Ministry of Finance and State Bureau of Taxation showed that by the end of April, the value-added tax (VAT) reform has helped save 700 billion yuan since its implementation last year.
VAT can prevent redundant taxes and help social division of labor. In addition to collecting government revenue, it plays a key role in creating new growth engines for China’s economy, according to Xiao Jie, minister of finance.
Driven by VAT reform, the ratio of the added value of the tertiary industry in gross domestic products (GDP) increased to 56.5 percent, and the service industry contributed 61.7 percent to economic growth in the first quarter.
To reduce administrative fees and institutional costs, the State Council also urged departments to publish the fees online to unify management nationwide.
Tax reduction is the key in the new-round finance reform. Statistics show that the number of newly registered enterprises has increased from 12,000 a day to 15,000 in the first four months, and 70 percent of them are still active.
China’s tax reduction plan and business system reform not only helped the transformation of old and new engines, but also gave boosts to the real economy, said Xu Zhengzhong, a professor at the Chinese Academy of Governance.
Against the economic downturn, shrinking revenue will raise market pressure for enterprises. To increase their sense of gain, the government should push forward system reform, and create a more favorable business environment, said Hu Yijian, a professor from Shanghai University of Finance and Economics.
He added that enterprises should enhance their innovation to create more added value and lower costs.
Zhang Bin, assistant director of the National Academy of Economic Strategy at the Chinese Academy of Social Sciences, said he believed that the government should better use funds and further cut expenses to create more space for tax reductions.