(Yicai Global) Nov. 21 -- China's manufacturing and related industries paid CNY800 billion (USD114 million) less tax during this year's first three quarters than last, making up more than half of the country's tax savings over the period.

Manufacturing has benefited the most from plans to cut up to CNY2 trillion in taxes that began this year, the State Administration of Taxation said yesterday.

The program is clearly starting to show its effectiveness, the department added, saying that the added value in the manufacturing industry rose 5.9 percent annually during the period and 8.7 percent in high-tech production. Investment in smart manufacturing also leaped 12.6 percent, some 7.2 percentage points faster than investment in all sectors.

The bulk of secondary industry tax cuts, nearly CNY522 billion, was a result of China cutting value-added tax to 13 percent from 16 percent, the administration said. This made up nearly three-quarters of all tax saved from the VAT reduction.

A further CNY115.7 billion came from lower salary taxes and an increase in the pre-tax deduction for research and development expenses -- making 75 percent of R&D spending tax free -- led to savings of CNY57.1 billion. Small- and micro-sized enterprises saved around CNY82 billion in taxes.

Some 45 percent of manufacturers used the extra cash to increase spending on research and development, with 100,000 major companies monitored by the tax authority splurging an extra 19.3 percent on R&D compared with last year, the tax department added. The growth rate was some 3.4 points higher than for the whole of 2018.

Editor: James Boynton