China Takes Stimulus Measures Further, Also Unveils Tax Card

China's Ministry of Finance Expands VAT Reductions and R&D Expense Deductions This Year
Central Government Supports Local Governments' Tax Revenue Shortfalls...Strict Warnings Against Tax Evasion

[Asia Economy Beijing=Special Correspondent Jo Young-shin] The Chinese government, which has been boosting the economy through monetary policies such as interest rate cuts, has also pulled out the tax card of 'tax reductions and fee cuts.' The Chinese government has been injecting liquidity since the beginning of the year, including lowering the Loan Prime Rate (LPR), the benchmark interest rate, by 0.1 percentage points due to concerns over economic deterioration this year.

According to state-run Xinhua News Agency on the 26th, the Chinese Ministry of Finance plans to reduce taxes and various fees this year to support corporate activities. The Ministry of Finance stated that last year's tax reduction and fee cut policies, amounting to 1 trillion yuan (approximately 189 trillion KRW), yielded positive results.

Vice Minister of Finance Xu Hongcai said, "Last year's tax reduction and fee cut policies led to the advancement of manufacturing and helped small and medium-sized enterprises (SMEs) and self-employed individuals (sole proprietors)." He added that this year, the scope of reductions and cuts will be further expanded. Vice Minister Xu emphasized the concept of 'Fang Shui Yang Yu (放水養魚: pouring water to raise fish).'

The Ministry of Finance mentioned expanding value-added tax (VAT) refunds for large enterprises and increasing deductions for research and development (R&D) expenses, expanding tax and various fee reductions for SMEs and self-employed individuals, and central government support for local governments' revenue shortfalls due to tax reductions this year.

Vice Minister Xu explained, "To promote qualitative development of manufacturing this year, we will increase VAT refunds and expand deductions for R&D expenses." The VAT refunds and R&D expense deductions appear to be support measures for large enterprises. He also emphasized that, following last year, tax and various fee reductions for SMEs and self-employed individuals will continue to be implemented this year.

Vice Minister Xu particularly indicated that the central government will provide support to prevent deterioration of local governments' finances caused by tax and various fee reductions.

However, he warned that tax evasion and other tax fraud will be dealt with firmly. Vice Minister Xu said, "This year's tax reductions and fee cuts will enhance market participants' trust and stabilize market expectations," expressing confidence that the government's tax policies such as tax reductions will promote sound development.

Regarding the Chinese government's tax policies, Premier Li Keqiang instructed tax reductions and fee cuts at the beginning of the year to ensure stable economic growth in the first quarter.

Xinhua News Agency added that during the 13th Five-Year Plan period (2016?2020), the total amount of tax reductions and fee cuts by the Chinese government exceeded 7.6 trillion yuan.

At the Central Economic Work Conference held in December last year, the Chinese government diagnosed that the 2022 economy faces three pressures: demand contraction, supply shocks, and weakened expectations, and announced that it would implement proactive fiscal policies to ensure stable growth.

Meanwhile, ahead of the upcoming Two Sessions (National People's Congress and Chinese People's Political Consultative Conference) in March, 31 local governments across China reported economic growth targets for this year to the central government, ranging from a low of 5.5% to a high of 9%.

This content was produced with the assistance of AI translation services.