Tax cut will move Chinese economy into new growth cycle
Update Date：2015-11-18 9:58:07 Source：BeiJing Tannet Views：849
Chinese government should grasp the chance to extend tax cuts to improve efficiency of financialsupply, to improve orderliness of land supply as well as labor supply, and reduce managementcost. Overall tax-cut will serve as the impetus of the reform in supply system, and initiate China'seconomy into a new growth cycle.
Some leading macroeconomic indicators have already shown signs of stabilizing, as a series ofsupportive measures have gradually taken effects after five years of economic downturn.However, strained by the lack of power to form and expand new supply, China's economy is inneed of a momentum to lead the rebound. Given the circumstances, should Chinese governmenttake no forceful measures, the economy might face an L-shaped prospect despite a periodicaltrough, leaving a series of potential risks accompanying deflation and local recession.
To ensure a healthy and stable economic growth and a quick recovery from the bottom, the mosteffective measures are to expand tax cut and offset fiscal gap by issuing bonds. Only in this waycan business investments and consumption be stimulated and meanwhile can the social sparefunds be effectively put into use.
Eighty percent of the enterprises are expecting tax-cut
Some statistics indicate that in 2013, the Chinese total government revenue was 20.87 trillionyuan, accounting for 36.7 percent of GDP, while in 2014, it reached 23.67 trillion yuan,accounting for 37.2 percent of GDP. The above macroscopic tax burden is slightly more than thatof developed countries and averagely 10 percent higher than that of developing countries. Afterputting taxation, governmental funds, various fees and social security payments intoconsideration, the enterprise tax burden is 40 percent or so, above the average of OECDcountries.
With more than 60 months of economic downturn, the already high tax burden, together withincreasing labor cost, financing cost and rent cost, has significantly eroded the profits of theenterprises, which not only seriously dampened the entrepreneurship enthusiasm, but also forcedmillions of entrepreneurs into the verge of breaking even.
In the past two years, a lot of efforts for lightening the burden on enterprises have been made byChinese central government, such as introducing a series of preferential tax policies for smallmicro enterprises and carrying out some structural tax cut measures represented by replacingthe business tax with VAT. According to official figures, by the end of 2014, the tax on smallmicro enterprises has been reduced by 61.2 billion yuan. The tax cut resulted from "replacing thebusiness tax with VAT" totaled 191.8 billion yuan. However, compared with 23.67 trilliongovernment revenue, the above tax cut seems very insignificant and is far from enough tostimulate business investments, encourage the entrepreneurship and the innovations of thepublic. Therefore, the tax cut was almost negligible for the macro economy. To make thingsworse, on the contrary, it turned out to be the structural tax increase for a few service industries.
A sampling survey of entrepreneurs indicates that among the measures for stabilizing economy,tax cut is the most favorable one for Chinese entrepreneurs, of which 80 percent have put forwardsuch an appeal.
The article transsshipment from China Daily
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