The VAT reform enables the continuous reduction of tax burden

As the latest statistics issued by the State Administration of Taxation (SAT) on August 13 indicated, the VAT reform that was started in May 1 lowered the original VAT rate of 17 percent for manufacturing industry and 11 percent for building industry and transportation industry by 1 percentage point separately. The tax cut policy started to show its positive effects since the tax declaration period in June. Specifically, the amount of tax cut from June to August totaled RMB 95.9 billion ($13.85 billion). What’s more, 18 enterprises from advanced manufacturing industry, modern service industry and power grid sector have started since July to refund the reserved deductible VAT. In two months including July and August, the tax authorities refunded the overpaid VAT with an amount of RMB 78.6 billion. The total tax cut was RMB 174.5 billion. 

The reporter from Economic Daily learned from the SAT, because of VAT cut policy, China’s VAT growth was 5.1 percent, 6.2 percent and 2.9 percent in June, July and August respectively, and tax revenue collected by the tax authorities (with the export tax rebate deducted) increased by 11.1 percent, 10 percent and 7.2 percent separately, thus revealing the growing tax-cut effects.

According to Huang Fengfeng, the financial leader of Shanghai Electric Wind Power Group Co Ltd, “For an enterprise of our size, the VAT rate cut by one percentage point can generate a very huge reduction in tax burden. If a single project is estimated to have an income of RMB 1.5 billion, the tax rate cut can contribute to our enterprise’s tax reduction by RMB 5.4 million. In this way, the annual tax cut is expected to exceed RMB 10 million.”

The financial head from Guangxi Fenglin Man-made Board Co Ltd said that the VAT rate cut by one percentage point can produce some instant effects. This means that the company can reduce the taxable amount of VAT by RMB 300,000 each month and by RMB 3.6 million each year. The saved capital can be invested in the research into new technologies and processes.

The continuous improvement in taxpayer service has further enhanced the enterprises' sense of gain. On July 27, the Semiconductor Division of Zhuzhou CRRC Times Electric Co Ltd received the tax refund with an amount of RMB 92.88 million in July. It took only four hours for this amount of money to go through the process from verification to refunding. On the same day, Zhang Yongjie, the Tax Manager from Ningbo Geely Automobile Research and Development Co Ltd, found the reserved deductible VAT refund of RMB 145 million available in the company’s account after he wanted into the office. 

The tax authorities has never ceased their efforts to deepen the reform of "delegation, regulation and service", implement the export tax rebate policy on a full scale and handle the export tax rebate in a timely manner. From January to August, the national tax authorities completed the export tax rebate with a total amount of RMB 1.0052 trillion, up 9.5 percent YoY. In August, they completed the export tax rebate with an amount of RMB 119.8 billion, up 15.8 percent YoY, thus offering a vigorous support for the export in foreign trade sector. In addition, the SAT and the Ministry of Finance (MOF) have recently issued the Circular on Increasing the Export Tax Rebate Rate of Mechanical & Electrical and Cultural Products. According to the Circular, 397 types of mechanical & electrical and cultural products will raise their VAT’s export tax rebate rate since September 15, 2018.

The tax authorities at all levels strengthened their innovative efforts to provide more convenient services for the enterprises which are entitled to the export tax rebate. The Zhangzhou City Tax Service, SAT launched the smart taxation service, reinforced the management of exporters by types, promoted the exporters’ paperless tax declaration and accelerated the approval and handling of export tax rebate (redemption) through Minshuitong APP and WeChat platform. As of August 31, over 98 percent of the local exporters conducted the paperless tax declaration and handled the export rebate (exemption) with an amount of RMB 3.95035 billion.

The SAT’s leader concerned said that the tax authorities will earnestly carry out the deployment of tax reduction decisions by the CPC Central Committee and the State Council, continuously carry out the tax reduction policy and constantly improve the taxation environment, enhance the convenience for taxpayers to enjoy the policy and strengthen their sense of gain, and boost the economic development and the people’s livelihood.