China's ongoing nationwide value-added tax (VAT) reform will reduce the tax burden for enterprises to the tune of 500 billion yuan (72.6 billion U.S. dollars) by the end of the year, according to a State Council meeting announcement.
Premier Li Keqiang presided over the meeting Tuesday, hearing a report on the current progress of VAT expansion, and elaborated the tasks ahead.
The VAT reform, which sets out to reduce the tax burden on enterprises and boost industrial upgrading and innovation, extended value-added tax to a whole variety of areas from this May, including construction, real estate, finance and consumer services. The reform is a nationwide structural tax reduction across all industries.
VAT reform plays a crucial role in China's effort to ensure steady economic growth and structural adjustment, the premier said.P The reform is carried out through joint efforts by various departments with ongoing detailed policy adjustment in order to facilitate smooth implementation.
Figures from the Ministry of Finance show that the reform is paying off.
From May to October, taxes continued to drop in construction, real estate, finance and consumer services, which have seen an increase of 530,000 tax payers. Over the past six months, the new tax scheme has helped enterprises save 96.5 billion yuan that otherwise would have been paid as tax. A total of 98.5 percent of business owners have seen their tax burden reduced or levelled off.
"The steady progress of the reform invigorated the market, reduced burdens for enterprises and helped creating employment opportunities," Li said.
The premier has placed great focus on the progress of the reform, requiring all related departments to develop tailored policies in various sectors to boost innovation and industrial upgrading.
There are, however, still problems to be addressed. For example, sectors such as finance, technology and tourism may require better tailored tax assessment measures. There are also companies yet to fully make use of the new VAT scheme.
A set of measures will soon be implemented to improve the reform. Tax assessment measures will be further tailored in construction and finance. Guidance will be provided to business owners on how to understand and make best use of the new taxation policy. The government will also improve methods of tax collection and provide more convenience to tax payers.
Third-party evaluation will be carried out to assess the results of the reform.
"In the long run, reducing tax will not only benefit enterprises, but also the country," Li said. "This is part of our proactive fiscal policy instead of giving policy support to particular industries and returning to the old path of the planned economy."
The meeting also decided that VAT revenues will be redistributed to local governments proportionately. This aims to encourage both central and local departments to participate in the tax reform, as well as lending support to underdeveloped regions' fiscal capacity.
