Chinese government takes concrete measures to reduce VAT on April 1
March 26, 2019 Category China News Round-up, Weekly
China will implement measures to cut the value-added tax (VAT) rates, making sure that tax burdens on all industries will only go down, not up, the Chinese government decided at an executive meeting presided over by Premier Li Keqiang. This year’s government work report set out the plan for larger-scale tax cuts, including lowering the VAT rate in manufacturing and other industries from 16% to 13%, and the VAT rate in transportation, construction and other industries from 10% to 9%. A host of concrete measures were decided upon at the meeting to achieve such targets, which will be enacted from April 1.
“The planned VAT cuts must be delivered in no time. Its implementation must be closely monitored to ensure that tax burdens are meaningfully reduced in the major industries and lowered to various extents in some industries. All industries will see their taxes go down, not up,” Premier Li Keqiang said. “In case of increased tax burden due to inadequate deductions in certain individual industries, the government will work out targeted solutions,” he added. In the government work report, Li said the government’s moves to cut tax on this occasion aim to strengthen the basis for sustained growth while also considering the need to ensure fiscal sustainability. It is also a major measure to lighten the burden on businesses and boost market dynamism.
In 2018, taxes and fees levied on enterprises and individuals were reduced by around CNY1.3 trillion as a result of multiple preferential tax policies introduced by the government. The meeting also decided on adjustments to the export tax rebate rates of certain goods and services and to the tax deduction rate of purchases of farm produce. It was also decided to increase transfer payments to local governments, focusing on supporting the central and western regions and counties and prefectures in difficulty. “The share that goes to enterprises in the national income distribution needs to be increased to boost market vitality. This will help keep employment stable, expand tax sources and make public finance sustainable,” Li said, as reported by the Shanghai Daily.
Five premium automotive brands have cut the prices of their models sold in China after the announced of a reduction of 3 percentage points in VAT in the manufacturing sector. Mercedes-Benz cut prices by CNY7,000 for a smart-branded car to CNY64,000 for a Mercedes-AMG. Its move was followed by BMW and Volvo, which offered similar cuts. Jaguar Land Rover slashed the prices of selected Range Rover models by CNY85,000. Ford’s premium arm Lincoln cut the prices of its models by up to CNY20,000. Car sales in China, the world’s largest vehicle market, stood at 1.48 million in February, down 13.8% year-on-year, the eighth month of decline in a row.
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