Fee and tax reductions are the most direct, fair and effective ways to help businesses, Chinese Premier Li Keqiang said at a press conference after the conclusion of the fifth session of the 13th National People's Congress in Beijing on Friday.
Li put the scale of tax rebates and fee reductions at 2.5 trillion yuan ($400 billion), with tax rebates at 1.5 trillion yuan. Small and micro enterprises, he said, will get priority in the concessions that will be completed before the end of June.
The premier said the central government has policy reserves and there are three choices: massive investment to help firms get orders, issuing coupons to directly stimulate consumption, and tax and fee cuts to stabilize employment and promote investment and consumption.
Enterprises prefer tax cuts and fee reductions, and they regard such policies as the first expectation for the government's macro policies this year, Li said, adding that China has cut 8.7 trillion yuan in taxes since 2013 when the country implemented the value-added tax reform.
Li said the central government has noticed new difficulties in local fiscal revenue, and this year it has increased its transfer payments to local governments by 18 percent with a total scale of 9.8 trillion yuan, which is rare in recent years. He also said tax rebates will be mainly paid by the central government.
The premier also promised tax credits for key industries such as manufacturing and research and development services would be fully resolved within the year.
"As global commodity prices keep moving higher amid tight supplies, inflation pressure may emerge later this year as raw material prices keep rising. Effective tax cuts policy would mitigate the negative impact and provide more support to consumption," Jimmy Zhu, chief strategist at Fullerton Research, said in an interview with CGTN after Li's press conference.
"For the companies, tax benefit measures would be useful to improve the companies' cash flows, leading to more employment opportunities and investment," Zhu added.
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