China taxation reforms to boost industrial upgrading

17 january 2013

BEIJING — Chinese Vice-Premier Li Keqiang has urged more taxation reforms and structural tax cuts to boost industrial upgrading and the transformation of the economic growth pattern.

Li made the remarks at a work meeting on expanding trials of replacing business tax with a value-added tax (VAT) on Thursday.

The adjustment in taxation is an important part of the country’s fiscal reform and a key measure to stabilize growth and adjust economic structure, and the government should accelerate the promotion of such measures to benefit more enterprises, said Li.

China has implemented a raft of tax-cutting measures since the beginning of this year, including a pilot program in Shanghai to replace the business tax with a value-added tax (VAT), in an effort to decrease the overall tax burden and boost the transportation and service sectors.

The pilot program was expanded to 9 provincial regions and 3 cities, including Beijing, Guangdong and Zhejiang, in August.

The move was not a simple adjustment but a significant systematic innovation, said Li, which aimed to realize fair taxation on goods and services, so as to promote the upgrading of the manufacturing sector and the development of the service sector.

The move is also important for boosting the development of small and medium-sized enterprises, he said. It helped reduced tax burdens for small-scale taxpayers by an average of 40 percent during trials, according to the meeting.

Li said that based on experiences from the current pilot schemes, a detailed scheme for expanding the trial basis should be formed and expansion should be carried out in an orderly manner.

The post and telecommunications, railway transportation and construction sectors will be added to the trial programs at an appropriate time, and the program will gradually be expanded nationwide, he added.

Li called for more determination and courage to carry on reforms in key sectors and crucial links and to deepen reforms in the fiscal and taxation, enterprise, financial, pricing and income distribution sectors to provide impetus to the country’s development.