Tax breaks stimulate corporate China

Updated 2017-06-20 10:09:48 China Daily
A local taxation bureau employee coaches a waitress in a guesthouse in a county of the Guangxi Zhuang autonomous region on how to make out a VAT invoice by using the new taxation system on May 1, 2016.

A local taxation bureau employee coaches a waitress in a guesthouse in a county of the Guangxi Zhuang autonomous region on how to make out a VAT invoice by using the new taxation system on May 1, 2016.

Cost reduction will help raise the vitality of the business sector and cut companies' financial burden by as much as 1 trillion yuan this year

Xu Shugen is head of a major manufacturing company in East China's Zhejiang province which helped to build the country's first large passenger aircraft.

The chairman of Zhejiang Dingli Machinery Co revealed that his group rolled out the electric aluminum work platforms used in the construction of the famed C919 commercial jet.

But none of that would have been possible for one of the leading companies in China without favorable tax breaks.

"It was a great honor to help in the process of building the C919," Xu told the Economic Daily. "Yet it would not have happened without the country's support policies, especially tax cuts."

Dingli Machinery Co makes electric lifts, platforms, aerial pickers and stackers, and has recorded rapid growth in the past 10 years, which has been partly fueled by pro-business tax breaks launched in 2006.

This has allowed the company to invest in upgrading and expanding its operations.

"The Zhejiang authority cut nearly 20 million yuan (.9 million) in taxes for the company in 2006, which was the equivalent of about half of our research and development budget that year," Xu said. "This year reduced taxes could amount to 50 million yuan."

A new round of tax breaks was announced last year in a move to stimulate growth in the corporate sector. Valued Added Tax, or VAT, was brought in to replace business tax, releasing a 500 billion yuan windfall for companies.

But the process has produced mixed results for businesses here.

Many small companies have complained about the increased taxation burdens and hidden financial fees at central and local government agency level.

In a bid to address those concerns, the State Council, or China's cabinet, decided at an executive meeting earlier this month to reduce fees and continue its tax-cutting policy.

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