Amid headwinds, multi govt units line up to ensure support for enterprises
Concerted efforts from multiple authorities in supporting value-added tax (VAT) credit refunds to businesses will play a critical role for the country's smaller businesses facing strong headwinds, and are expected to tide them through challenging times, officials and experts said.
Wang Daoshu, deputy commissioner of the State Taxation Administration, said at a news briefing on Tuesday that in April, some 801.5 billion yuan ($119.2 billion) of the newly increased VAT credits have been refunded to taxpayers.
Combined with refunds generated from the previous tax refund policies in the first quarter, the total amount of tax refunds from January to April reached 924.8 billion yuan. Their role in helping enterprises and alleviating business burdens has made initial impacts.
It was noted in this year's Government Work Report in March that this year, tax and fee reductions will continue to work as an important measure to help businesses and support the economy. It said that VAT credit refunds will reach 1.5 trillion yuan this year and will all go straight to enterprises.
Jia Ronge, an official from the State Taxation Administration, said on Tuesday that small- and micro-sized businesses have been the major recipients and beneficiaries of this round of VAT credit refunds.
"Smaller businesses are large in number and cover wide sectors, and are also the country's major job creators. They are the key driving force of growth and an important source of innovation," he said. "Yet they also tend to be vulnerable to risk. We expect the tax refunds will be timely help for them to tackle issues amid current liquidity difficulties and overcome them at this challenging time."
Among all recipients of the tax refunds in April, the number of small and micro-sized businesses came in at 1.395 million, making up 96.1 percent of the total, according to the news briefing.
It was announced at the Tuesday briefing that ensuring sizable tax cuts and refunds this year will be forcefully delivered, a coordination mechanism that covers the Ministry of Finance, the State Taxation Administration and the People's Bank of China, the central bank, has been established under the approval of the State Council, the nation's Cabinet.
Dong Huajie, director of the State Treasury Bureau of the PBOC, said that the central bank has made particular efforts to support the tax refund move. Since the start of the year, the PBOC has provided 800 billion yuan in surplus profit to central finance, and the total amount of profits handed over from the PBOC will exceed 1.1 trillion yuan for this year.
"Handing the 800 billion yuan in profit from the PBOC is equivalent to cutting the reserve requirement ratio for banks by 0.4 percentage point. Incorporated with other monetary policy actions, this will help to keep liquidity at a sufficient and reasonable level," he said.
He added that such funding will help build a solid funding foundation for the tax refunds, as it will directly enhance fiscal capacity and therefore better energize market players.
He Daixin, deputy director of the financial research office of the National Academy of Economic Strategy of the Chinese Academy of Social Sciences, said that surplus profits handed over by the central bank are of critical importance this year. He said the move will directly enhance central fiscal capacity, increase effective fiscal spending under budget, and therefore contribute notably to steady growth.