China Targets VAT Cuts at Business
Chen Yikan | Zou Zhenjie
DATE:  Mar 06 2019
/ SOURCE:  yicai
China Targets VAT Cuts at Business China Targets VAT Cuts at Business

(Yicai Global) March 6 -- China has revealed a raft of value-added tax cuts as part of efforts to ease the burden on business.

The government will lower VAT on manufacturers by 3 percentage points to 13 percent, Premier Li Keqiang yesterday told the second session of the 13th National People's Congress, the nation's legislature. It will also trim VAT on transportation, construction and other industries by 1 point to 9 percent.

The benefit will be felt differently across sectors, said Tian Zhiwei, assistant dean at the Institute of Public Policy and Governance at Shanghai University of Finance and Economics, adding that corporate net profits could rise 0.7 percent to 0.9 percent thanks to the easing.

China introduced VAT, effectively replacing the business tax, in 2016. At that time it was considered the most important tax reform in more than two decades. The VAT on manufacturers was cut to 16 percent from 17 percent at a cabinet meeting last March. The rate for other sectors was trimmed to 10 percent from 11 percent.

A tax director at one large firm told Yicai Global that the latest move could save his company more than CNY100 million (USD14.9 million) a year. But consumers have the most to gain, according to Tian, enjoying between 60 percent and 70 percent of the total reduction in value-added tax.

The sectors that stand to get the most out of the cuts are computing, telecoms and electronics manufacturing, as well as cultural and educational products and goods related to arts, sports and entertainment, Tian added. The retail and real estate sectors, along with mining and tobacco industries, will also get a boost.

Editor: William Clegg

Follow Yicai Global on
Keywords:   Tax Reduction,Value-Added Tax,Two Sessions