China Daily
Official: VAT reform to help firms cope with financial turmoil
(Xinhua)
Updated: 2008-12-09 17:46
A senior Chinese official said on Tuesday that the country's value-added tax (VAT) reform would help domestic enterprises to tide over the adverse effects of the financial crisis.
Zheng Jianxin, deputy director general of the taxation department of China's Ministry of Finance, said Chinese exports were hit by the financial turmoil starting from the United States and the government was weighing measures to reduce the impacts.
"The VAT reform would encourage investment and technological upgrading at Chinese companies, boost domestic demand, improve companies' competitive strength and play a positive role in helping companies to tackle the financial crisis," Zheng said during an on-going online interview with netizens on the website www.gov.cn.
China announced last month to extend its value-added tax (VAT) reform to all industries nationwide from January 1, 2009, as part of the 4 trillion yuan ($586 billion) stimulus package in the next two years to buttress economic growth.
The reform was aimed at a shift from the existing production-based to a consumption-based VAT regime, which would enable companies to get tax deductions on spending on fixed assets, Zheng said, adding that this would reduce the tax burden on companies by more than 123 billion yuan next year.
The reform would also scrap policies that exempted imported equipment from VAT, and removed foreign-funded companies from eligibility for tax rebates on domestic equipment purchases and put them on an equal footing with domestic companies, he said.
"The VAT rate for small businesses and the self-employed who fall into the small-scale taxpayers category was reduced to a universal 3 percent from 6 percent for industrial firms and from 4 percent for commercial companies, while the VAT rate for mineral products rose back to 17 percent from 13 percent," he added.
Tuesday, December 9, 2008
China - Banking business tax cut not long-term solution
China Daily
Banking business tax cut not long-term solution
By Xu Shenglan
Updated: 2008-12-09 16:14
Experts said that banking regulators may help banks secure profits by cutting their business taxes, Guangzhou Daily reported today.
It was reported earlier that policymakers may cut business taxes for commercial banks by 2 percentage points from the current 5 percent, which would help those banks enrich their capital flows.
A report released by Citibank predicts that a 2-percentage point cut in business tax would lead to six percent surge in average payoffs in China's banking industry next year.
"The tax cuts will help banks deal with bad loans and resist risks amid the economic downturn," said Wu Yonggang, a financial analyst at Guotai Junan Securities. "Also, this is a signal that the government cares about banks' performances and wouldn't easily transfer their profits to other industry sectors."
The business tax cut is at the same end as the nominal income tax reduction, said Wen Chunling, an analyst at Fitch Ratings. Both of them aim to improve banks' profit levels. From the beginning of this year, Chinese banks' nominal income tax rate was lowered to 25 percent from 33 percent.
However, experts still believed that a mere tax cut won't necessarily lead to better banks' performances. Wen said Chinese banks will still face difficulties next year in making profits, when the central bank may further loosen its monetary policy next year and narrow the interest rate gap between deposits and loans to increase liquidity.
Moreover, the yield ratio of fixed-income portfolio such as treasury bonds is also expected to decline along with a potential interest rate cut, which will put more pressure on banks for profits.
Wang Zhaowen, spokesman for Bank of China, said he hasn't received any news on a business tax cut.
Banking business tax cut not long-term solution
By Xu Shenglan
Updated: 2008-12-09 16:14
Experts said that banking regulators may help banks secure profits by cutting their business taxes, Guangzhou Daily reported today.
It was reported earlier that policymakers may cut business taxes for commercial banks by 2 percentage points from the current 5 percent, which would help those banks enrich their capital flows.
A report released by Citibank predicts that a 2-percentage point cut in business tax would lead to six percent surge in average payoffs in China's banking industry next year.
"The tax cuts will help banks deal with bad loans and resist risks amid the economic downturn," said Wu Yonggang, a financial analyst at Guotai Junan Securities. "Also, this is a signal that the government cares about banks' performances and wouldn't easily transfer their profits to other industry sectors."
The business tax cut is at the same end as the nominal income tax reduction, said Wen Chunling, an analyst at Fitch Ratings. Both of them aim to improve banks' profit levels. From the beginning of this year, Chinese banks' nominal income tax rate was lowered to 25 percent from 33 percent.
However, experts still believed that a mere tax cut won't necessarily lead to better banks' performances. Wen said Chinese banks will still face difficulties next year in making profits, when the central bank may further loosen its monetary policy next year and narrow the interest rate gap between deposits and loans to increase liquidity.
Moreover, the yield ratio of fixed-income portfolio such as treasury bonds is also expected to decline along with a potential interest rate cut, which will put more pressure on banks for profits.
Wang Zhaowen, spokesman for Bank of China, said he hasn't received any news on a business tax cut.
China - Tax cuts for businesses in pipeline
China Daily
Tax cuts for businesses in pipeline
By Xin Zhiming and Wang Bo (China Daily)
Updated: 2008-12-09 07:18
As top policymakers ponder ways to ensure GDP growth of at least 8 percent next year, the government is "very likely" to initiate cuts in business tax to add impetus to the slowing economy.
The officials Monday began the three-day annual Central Economic Work Conference in Beijing, which sets the tone for policies next year.
The authorities may soon cut business tax for enterprises by 1 percentage point from the current 5 percent, a source close to policymakers told China Daily, without mentioning a timeframe.
That would amount to 120 billion yuan ($17.5 billion) worth of tax cuts given annual business tax revenues of more than 600 billion yuan ($87.6 billion) last year.
Business tax - distinct from enterprise income tax and value added tax - is levied on enterprises and individuals that provide labor services, transfer intangible assets or sell immovable property in China.
It was also reported earlier that policymakers would discuss raising the threshold of personal income tax from 2,000 yuan to 3,000 yuan a month to spur domestic consumption.
The government, which announced a massive $586 billion stimulus package on Nov 9, wants at least 8 percent growth to provide employment opportunities to the roughly 10 million people entering the job market each year.
Policymakers at the economic conference are expected to reach a consensus on how to implement the stimulus plan in a coordinated manner.
"The economic conference this week may be mostly about fine-tuning these stimulus measures and thinking ahead to what next," said David Dollar, the World Bank country chief for China.
"I think the stimulus will be enough to keep China growing at a healthy rate so the focus now should be on good implementation."
"They (policymakers) will be laying out just how big the kitchen sink has to be to re-invigorate the economy," said Stephen Green, senior Standard Chartered Bank economist in Shanghai. "All the data suggests the economy has further skidded into the fourth quarter."
"How to co-ordinate all that, how to judge its effectiveness, and what is next in terms of policy will likely all be discussed at the conference," Green said.
The major task at the conference is for policymakers to take concerted steps to keep the economy from being derailed by the global financial crisis and economic slowdown.
"Above all else, the aim of the meeting will be to get everyone on the same page - growth, above all else," he said, adding that the effect of the stimulus policies would surface in the second quarter of next year.
The nation's economic growth dropped to 9 percent in the third quarter, compared with 11.4 percent last year. The global economic slowdown may even drag down China's growth to 7.5 percent in 2009, the lowest in two decades, the World Bank forecast earlier.
The Chinese Academy of Social Sciences, however, was more upbeat in a report last week, tipping growth of around 9 percent next year.
Latest Updates
9 December 2009
Tax cuts for businesses in pipeline
By Xin Zhiming and Wang Bo (China Daily)
Updated: 2008-12-09 07:18
As top policymakers ponder ways to ensure GDP growth of at least 8 percent next year, the government is "very likely" to initiate cuts in business tax to add impetus to the slowing economy.
The officials Monday began the three-day annual Central Economic Work Conference in Beijing, which sets the tone for policies next year.
The authorities may soon cut business tax for enterprises by 1 percentage point from the current 5 percent, a source close to policymakers told China Daily, without mentioning a timeframe.
That would amount to 120 billion yuan ($17.5 billion) worth of tax cuts given annual business tax revenues of more than 600 billion yuan ($87.6 billion) last year.
Business tax - distinct from enterprise income tax and value added tax - is levied on enterprises and individuals that provide labor services, transfer intangible assets or sell immovable property in China.
It was also reported earlier that policymakers would discuss raising the threshold of personal income tax from 2,000 yuan to 3,000 yuan a month to spur domestic consumption.
The government, which announced a massive $586 billion stimulus package on Nov 9, wants at least 8 percent growth to provide employment opportunities to the roughly 10 million people entering the job market each year.
Policymakers at the economic conference are expected to reach a consensus on how to implement the stimulus plan in a coordinated manner.
"The economic conference this week may be mostly about fine-tuning these stimulus measures and thinking ahead to what next," said David Dollar, the World Bank country chief for China.
"I think the stimulus will be enough to keep China growing at a healthy rate so the focus now should be on good implementation."
"They (policymakers) will be laying out just how big the kitchen sink has to be to re-invigorate the economy," said Stephen Green, senior Standard Chartered Bank economist in Shanghai. "All the data suggests the economy has further skidded into the fourth quarter."
"How to co-ordinate all that, how to judge its effectiveness, and what is next in terms of policy will likely all be discussed at the conference," Green said.
The major task at the conference is for policymakers to take concerted steps to keep the economy from being derailed by the global financial crisis and economic slowdown.
"Above all else, the aim of the meeting will be to get everyone on the same page - growth, above all else," he said, adding that the effect of the stimulus policies would surface in the second quarter of next year.
The nation's economic growth dropped to 9 percent in the third quarter, compared with 11.4 percent last year. The global economic slowdown may even drag down China's growth to 7.5 percent in 2009, the lowest in two decades, the World Bank forecast earlier.
The Chinese Academy of Social Sciences, however, was more upbeat in a report last week, tipping growth of around 9 percent next year.
Latest Updates
9 December 2009
The Straits Times
Dec 9, 2008 |
China to cut business tax
BEIJING - CHINA may soon cut business tax as part of its efforts to prop up the slowing economy amid the global financial crisis, state media reported on Tuesday.
The government is 'very likely' to soon cut the business tax for enterprises by one percentage point, the China Daily said, citing an unnamed source close to policymakers.
China's current business tax varies from three to 20 per cent, boosting government revenue by 600 billion yuan (S$131 billion) last year, according to the paper.
The news follows other state press reports last week that Beijing was planning to cut business tax for commercial banks - possibly to three percent from the current five percent, to help improve their capital adequacy.
Beijing has launched a number of tax measures aimed at maintaining growth as the global meltdown's impact on the Chinese economy becomes increasingly pronounced.
It has increased export tax rebates on various items from textile to steel products and has announced plans to lower export tariffs on agricultural goods by up to 30 per cent.
Top leaders meeting now in Beijing at an annual policy-setting conference will discuss raising the minimum taxable personal income threshold to 3,000 yuan per month from the current 2,000 yuan, the China Daily said. -- AFP
ECB chief says economic woes to persist for quarters
XinHua News
ECB chief says economic woes to persist for quarters
2008-12-09 04:37:59
BRUSSELS, Dec. 8 (Xinhua) -- The current economic woes arising from the global financial crisis is expected to persist for a few quarters in the euro zone, the European Central Bank (ECB) President Jean-Claude Trichet warned on Monday.
The combined economy of the 15 European Union (EU) nations that use the euro already plunged into a technical recession in the third quarter of this year, for the first time since its establishment in 1999.
"Global economic weakness and very sluggish domestic demand can be expected to persist in the last quarter of 2008 and in the next few quarters," Trichet said in a speech to the Economic and Monetary Affairs Committee of the European Parliament in Brussels.
"Subsequently, a recovery should gradually take place, supported by the fall in commodity prices and assuming that the external environment improves and financial tensions weaken," he added.
Trichet told the EU lawmakers that the eurozone economic growth could be between minus 1 percent and zero percent, according to the ECB's latest forecast.
In a bid to stimulate the economy, the ECB cut its benchmark interest rate by 75 basis points on Thursday, putting the overall reduction at 175 basis points in less than two months.
"We will continue to keep inflation expectations firmly anchored in line with price stability, thereby supporting sustainable growth and employment, and contributing to financial stability," Trichet said.
Thanks to significant drop of oil prices, the eurozone inflation eased in recent months and fell to 2.1 percent in November, close to the 2 percent ceiling preferred by the ECB to maintain price stability.
"With lower commodity prices and weakening demand, annual inflation is expected to be in line with price stability over the policy-relevant horizon," Trichet said.
Editor: Sun
ECB chief says economic woes to persist for quarters
2008-12-09 04:37:59
BRUSSELS, Dec. 8 (Xinhua) -- The current economic woes arising from the global financial crisis is expected to persist for a few quarters in the euro zone, the European Central Bank (ECB) President Jean-Claude Trichet warned on Monday.
The combined economy of the 15 European Union (EU) nations that use the euro already plunged into a technical recession in the third quarter of this year, for the first time since its establishment in 1999.
"Global economic weakness and very sluggish domestic demand can be expected to persist in the last quarter of 2008 and in the next few quarters," Trichet said in a speech to the Economic and Monetary Affairs Committee of the European Parliament in Brussels.
"Subsequently, a recovery should gradually take place, supported by the fall in commodity prices and assuming that the external environment improves and financial tensions weaken," he added.
Trichet told the EU lawmakers that the eurozone economic growth could be between minus 1 percent and zero percent, according to the ECB's latest forecast.
In a bid to stimulate the economy, the ECB cut its benchmark interest rate by 75 basis points on Thursday, putting the overall reduction at 175 basis points in less than two months.
"We will continue to keep inflation expectations firmly anchored in line with price stability, thereby supporting sustainable growth and employment, and contributing to financial stability," Trichet said.
Thanks to significant drop of oil prices, the eurozone inflation eased in recent months and fell to 2.1 percent in November, close to the 2 percent ceiling preferred by the ECB to maintain price stability.
"With lower commodity prices and weakening demand, annual inflation is expected to be in line with price stability over the policy-relevant horizon," Trichet said.
Editor: Sun
China - Economic stimulus package to improve people's livelihood
XinHua News
Economic stimulus package to improve people's livelihood
2008-12-08 23:58:34
By Xinhua writers Wang Yaguang and Jiang Xufeng
BEIJING, Dec. 8 (Xinhua) -- Unlike measures taken during the Asian financial crisis 11 years ago, more attention is focused on improving people's living standards in the Chinese government's recent 4 trillion yuan (584 billion U.S. dollars) economic stimulus package, experts said.
The package, unveiled early last month, included 280 billion yuan in spending for low-income housing projects, 370 billion yuan for improving people's living standards and infrastructure in rural areas and 40 billion yuan for health and education programs.
A total of 1.8 trillion yuan will go to construction of railways, highways, airports and power grids.
It also included 350 billion yuan for ecological and environmental projects, 160 billion yuan for technological innovation and one trillion yuan for reconstruction in regions worst hit by the May 12 earthquake.
The frequent appearance of "improving people's living standard" in the government's recent statements indicated a mind-set shift of China's policy makers towards more sustainable development, analysts said.
Zhang Hanya, a senior researcher with the National Development and Reform Commission (NDRC), told Xinhua on Monday that the stimulus package would greatly benefit the public either in a direct or indirect way.
"The investment pooled into low-income housing, medical care and education will improve the Chinese welfare directly. Massive spending on infrastructure, transport, after-quake reconstruction and other areas would bring indirect benefits to the public," Zhang said.
Of the 100 billion yuan added to the fourth quarter central budget, 7.5 billion yuan was allocated for low-rent and affordable apartments.
Another 4.4 billion yuan would be spent before the end of this year to improve school buildings and add teaching facilities in central and western China, which are less developed than the coastal regions in the east.
More than one million students in more than 2,000 schools would benefit from it, according to China's Ministry of Education.
The investments on railways, airports and other infrastructure projects, which accounted for 45 percent of the package, would help boost employment and increase people's earning, said Bai Jingming, deputy director of the Fiscal Science Research Institute of the Ministry of Finance.
The government decided to increase the basic retirement pension for enterprise retirees by 10 percent from Jan. 1 in 2009. The move gives them about 200 more yuan per month.
"This will not only help to enhance the residents' livelihood, but also raise their consumption capacity. Some rich families would not care too much about 200 yuan, but many low-income families would have more meat or fish in their main course for dinner every day," Zhang said.
"This is a virtuous circle of economy and will become the engine to boost the next round of economic growth," said Cao Jianhai, a researcher with the Chinese Academy of Social Sciences.
Editor: Sun
Economic stimulus package to improve people's livelihood
2008-12-08 23:58:34
By Xinhua writers Wang Yaguang and Jiang Xufeng
BEIJING, Dec. 8 (Xinhua) -- Unlike measures taken during the Asian financial crisis 11 years ago, more attention is focused on improving people's living standards in the Chinese government's recent 4 trillion yuan (584 billion U.S. dollars) economic stimulus package, experts said.
The package, unveiled early last month, included 280 billion yuan in spending for low-income housing projects, 370 billion yuan for improving people's living standards and infrastructure in rural areas and 40 billion yuan for health and education programs.
A total of 1.8 trillion yuan will go to construction of railways, highways, airports and power grids.
It also included 350 billion yuan for ecological and environmental projects, 160 billion yuan for technological innovation and one trillion yuan for reconstruction in regions worst hit by the May 12 earthquake.
The frequent appearance of "improving people's living standard" in the government's recent statements indicated a mind-set shift of China's policy makers towards more sustainable development, analysts said.
Zhang Hanya, a senior researcher with the National Development and Reform Commission (NDRC), told Xinhua on Monday that the stimulus package would greatly benefit the public either in a direct or indirect way.
"The investment pooled into low-income housing, medical care and education will improve the Chinese welfare directly. Massive spending on infrastructure, transport, after-quake reconstruction and other areas would bring indirect benefits to the public," Zhang said.
Of the 100 billion yuan added to the fourth quarter central budget, 7.5 billion yuan was allocated for low-rent and affordable apartments.
Another 4.4 billion yuan would be spent before the end of this year to improve school buildings and add teaching facilities in central and western China, which are less developed than the coastal regions in the east.
More than one million students in more than 2,000 schools would benefit from it, according to China's Ministry of Education.
The investments on railways, airports and other infrastructure projects, which accounted for 45 percent of the package, would help boost employment and increase people's earning, said Bai Jingming, deputy director of the Fiscal Science Research Institute of the Ministry of Finance.
The government decided to increase the basic retirement pension for enterprise retirees by 10 percent from Jan. 1 in 2009. The move gives them about 200 more yuan per month.
"This will not only help to enhance the residents' livelihood, but also raise their consumption capacity. Some rich families would not care too much about 200 yuan, but many low-income families would have more meat or fish in their main course for dinner every day," Zhang said.
"This is a virtuous circle of economy and will become the engine to boost the next round of economic growth," said Cao Jianhai, a researcher with the Chinese Academy of Social Sciences.
Editor: Sun
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