(Yicai) Dec. 1 -- China will standardize its tax preferential policies over the next five years, phasing out some outdated measures, which will affect wind power, nuclear power, financial leasing, aircraft maintenance, new energy vehicles, and other industries, according to the recently released official recommendations for the country's 15th Five-Year Plan.

The Ministry of Finance announced the elimination of value-added tax and other tax preferential policies related to wind power, nuclear power, financial leasing, aircraft maintenance, platinum and its products, diamonds, new wall materials, and coalbed methane extraction in October. In addition, China will impose a 5 percent tax on NEV purchases starting next year, rather than providing full exemptions.

In August, the State Taxation Administration said it will resume collecting VAT on interest income from newly issued government, local government, and financial bonds on or after Aug. 8.

The tax preferential policies canceled this year have two characteristics, said Tian Zhiwei, executive dean of the Institute of Public Policy and Governance at the Shanghai University of Finance and Economics. First, the standardization efforts mainly focus on indirect taxes such as VAT, and second, phased tax preferences targeting specific industries and products are being promptly withdrawn, he noted.

"The new measures do not cancel all tax preferences," Tian said. "For example, while the 50 percent VAT refund policy for onshore wind power is being eliminated, tax preferences for electricity produced using offshore wind power are retained.

"Partial exemptions for tax on NEV purchases also remain," Tian pointed out. "This not only facilitates an orderly phase-out of policies but also enhances the precision of tax preferential policies."

Beyond canceling or consolidating certain tax preferential policies, China will introduce more substantial tax incentives for key sectors. For example, the additional deduction ratio for research and development expenses for high-tech companies and small and medium-sized tech firms will increase to 120 percent or higher from 100 percent to encourage them to boost relevant investment.

China has multiple tax preferential policies characterized by low legal hierarchy and fragmentation, according to Tian. Standardizing tax preferences is not simply about reducing them, but rather a systematic governance of tax preferential policy chaos, thereby promoting the setup of a fairer, more transparent, and modern tax system, he stressed.

China's tax revenue rose 1.7 percent in the first 10 months ended Oct. 31 from a year earlier, while it fell 3.4 percent to CNY17.5 trillion (USD2.46 trillion) last year from 2023, according to data from the finance ministry. The macro tax burden was around 13 percent in 2024, relatively low compared with global economies.

Editor: Martin Kadiev