Three Firms in Hunan Kept Hiring, Realized Growth Amid Covid-19 Due to China’s Huge Tax Cuts
Zhu Yanran
DATE:  Aug 20 2020
/ SOURCE:  Yicai
Three Firms in Hunan Kept Hiring, Realized Growth Amid Covid-19 Due to China’s Huge Tax Cuts Three Firms in Hunan Kept Hiring, Realized Growth Amid Covid-19 Due to China’s Huge Tax Cuts

(Yicai Global) Aug. 20 -- The Chinese government waived CNY1.5 trillion (USD216.8 billion) in taxes and fees nationwide in the first half to help bolster the economy during the novel coronavirus pandemic. Three local businesses in Changsha, capital of central Hunan province, told Yicai Global how these subsidies enabled them to keep hiring, realize growth and offset the negative impact on foreign trade.

Modern China Tea Shop, a local tea brand with over 260 chain stores, benefited from CNY10.9 million (USD1.6 million) in value-added tax exemptions, CNY3.1 million worth of reductions in social security premiums and CNY1.1 million in income tax cuts for small businesses, founder Lv Liang said.

By lowering the firm’s tax and social premium costs, the firm was able to keep on hiring and raise wages during the outbreak rather than cutting jobs, Cheng Xiaofeng, chief financial officer of the tea shop’s operator Hunan Chayue Catering Management, said.

Modern China re-opened for business in March after the epidemic passed, and almost all its stores were operating normally again by the end of April, it said. By May, each shop was making an average of CNY250,000 (USD36,000) a month, the same as the previous year, and income has continued to grow, reaching an all-time high of CNY290,000 in July during the summer vacation on an increase in takeaway orders. In the first half, the firm reported revenue of CNY220 million (USD31.8 million).

Enabled Growth

Willfar Information Technology, an Internet of Things developer, has reaped CNY40 million (USD5.8 million) in tax cuts since last year. The firm has ploughed all of this ‘saved’ money into its research and development projects, Chief Financial Officer Zhong Xiyu said.

Social premiums, VAT and export rebates implemented during the outbreak helped the firm realize growth in the first quarter, he said. Net profit jumped 16.5 percent year on year to CNY32.7 million on revenue of CNY239 million, a rise of 4.7 percent.

The favorable income tax policies and a new policy which raised the tax exemption rate for research and development expenses to 75 percent from 50 percent markedly stimulated the company to innovate in science and technology, Zhong said.

Almost half of the firm’s 713 employees work in R&D. The company, which was the first firm in Hunan province to list on the Shanghai Stock Exchange’s Nasdaq-style Star Market, spends 7 percent of revenue on R&D each year and has secured 607 patents, 73 of which are for invention.

Reduced Fallout

Lens Technology, an iPhone glass screen supplier that employs over 100,000 people, paid CNY60 million (USD8.8 million) less personal income tax last year than it did in 2018, General Manager Liu Shu said.

It has also saved CNY318 million on social security reductions between February and June thanks to the new rebates, which has greatly helped to offset the fallout from the pandemic, he said. Foreign trade has suffered, and the company's production and sales have been sluggish for some time, Liu said.

Spurred by the government’s special tax cuts for key groups to stabilize employment, the firm was also able to provide 7,800 jobs to low-income residents and veterans which is expected to save the firm nearly CNY40 million in taxes this year, he added.

Editors: Dou Shicong, Kim Taylor

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Keywords:   Tax Reduction,Modern China Tea Shop,Willfar,Lens