(Yicai Global) March 25 -- China's central government will raise over CNY1 trillion (USD148.9 billion) this year by increasing income and reducing expenditure to ease financial pressure caused by cuts to taxes and fees totaling CNY2 trillion this year, the finance ministry has said.
Authorities will call on state-owned financial institutions and enterprises to turn in more profits while reducing expenditure by CNY200 billion (USD29.8 billion) Finance Ministry Liu Kun said at the China Development Forum in Beijing yesterday.
"In this case, central transfer payments to local financial institutions will not go down but increase," he said. "Taxes returned and transfer payments made by the central government to local authorities grew 8.2 percent last year and this will rise 9 percent this year to them solve fund shortages."
Cutting CNY2 trillion in taxes and fees is a priority for fiscal policymakers, of which 70 percent comes from taxes reductions and the rest is based on insurance contributions and government fees, he stated, adding that the finance ministry will implement policies focused on making the tax burdens for manufacturing, small and micro firms smaller.
China will lower its value-added tax rates from 16 percent to 13 percent and 10 percent to 9 percent on April 1, thus cutting nearly CNY1 trillion in taxes this year, according to an announcement on March 21. Local governments can also reduce the proportion of urban employees' basic pension insurance contributions paid by employers from 20 percent to 16 percent on May 1.
"We can achieve financial balance and sustainable development despite large tax and fee cuts," Liu stressed. "In this process, we will use financial funds better to meet the demands of social and economic development in all respects."
Editor: William Clegg