Premier Li: China to implement more tax and fee cuts this year
China is determined to implement large-scale tax and fee cuts this year as a key countermeasure against downward economic pressure, Premier Li Keqiang said Friday at a press conference after the conclusion of the annual session of the National People's Congress, China's national legislature .
In the past several years China has worked to replace business tax with value-added tax (VAT). The country has cut 1 trillion yuan in taxes each year for the past three years. China will make reductions in VAT and localities social insurance contributions this year. The total reductions for all companies will be worth 2 trillion yuan.
Premier Li said that the tax cut is a fair and effective means to bring benefits to companies as the same rules will be enforced, and it will reach directly to all market players. VAT rate cuts will start from April 1, and social insurance contributions from May 1.
VAT rates will be cut by 3 percent in sectors including manufacturing, which accounts for 50 percent of all VAT. For construction and related sectors, VAT will be cut by 1 percent. "We will work to ensure the tax burden levied on companies will only go down rather than increasing," Premier Li said.
Localities social insurance contributions will be cut down to 16 percent from 20 percent.
When VAT reform was carried out several years ago, there was a dip in fiscal revenue, but it didn't take long for fiscal revenue to increase as the tax base expanded. VAT reform is not taking an overdraft on our future, but nurturing a better tomorrow, Premier Li said.
"Eventually our goal is to deliver concrete benefits to all market entities," Premier Li said.