BEIJING: With businesses in China rebounding from the effects of the Covid-19 pandemic since the start of this year, the nation’s economic growth has accelerated.
Business owners – from manufacturing to services – are resuming production, and economic activities are up and running again, with the economy growing by 4.5% year-on-year in the first quarter, exceeding expectations.
A series of factors helped businesses survive three years of challenging times.
For most companies, fiscal policy aid has been urgently needed and consistently applied.
During this time, many enterprises –large and small – have been able to apply for tax relief and liquidity support under various preferential policies.
They have used these funds to keep their payrolls stable, retain workers and resume production.
Zhuo Changli, 59, head of an agency in Jinan, Shandong province that specialises in domestic services and cares for the elderly and children, said tax and fee relief has been a crucial policy support measure for the business since 2020.
In 2019, just two months before Covid-19 emerged, the Finance Ministry issued a circular announcing increased value-added tax, or VAT, deductions for community services such as housekeeping, child care, and care for the elderly.
This meant that Zhuo’s agency could save costs and that its financial pressure was greatly relieved.
“Looking back, the policy was a near-lifesaver for our company and the entire domestic services industry,” Zhuo said.
For the past three years, Zhuo’s agency has used funds gained from a series of tax cuts to sustain its operations and keep its payroll stable, particularly during the pandemic.
Moreover, tax cuts introduced from 2020 to last year to assist small businesses helped keep the agency operational.
Last year, it enjoyed a tax cut of about 3.06 million yuan (US$439,722 or RM2.01mil), equivalent to 25% of its profit for the year.
Li Yucheng, director of the government fund settlement center in Jinan, said: “Local fiscal and taxation departments have worked in synergy and innovated preferential tax policy implementation.
“They’ve also launched a raft of measures to facilitate tax payment to ensure that such tax and fee breaks can benefit businesses directly.”
In January, figures released by the Finance Ministry showed that tax and fee cuts, tax refunds and deferred payments last year totaled 4.2 trillion yuan (RM2.7 trillion), including 2.4 trillion yuan (RM1.6 trillion) in VAT tax rebates – the largest amount in recent years.
Since mid-2020, when Covid-19 started to affect businesses, particularly small and micro ventures, China has issued a range of fiscal policy support measures to ease their cost burdens.
Tax and fee reductions introduced from 2020 to last year totalled about 7.8 trillion yuan (RM5.04 trillion).
The reductions included postponed tax payments for micro, small and medium-sized enterprises.
Tax cuts for self-employed businesses totaled 1.02 trillion yuan (RM659bil).
Last year, a refined VAT measure was introduced nationwide, offering support mainly for manufacturing businesses experiencing supply and production chain disruption, rising costs for bulk commodities, and problems due to surging cases of Covid-19.
Local authorities and business owners are now benefiting from such policies.
Yuan Peiquan, deputy head of the Shandong Provincial Department of Finance, said: “Tax and fee reductions have proved a direct and effective way of helping enterprises ease their financial burdens.
“They’ve helped nurture businesses and have cultivated sources of tax revenue.”
Last year, Shandong realised 297.6 billion yuan (RM192bil) in deferred tax and fee cuts.
Local VAT credit rebates totalled 172.2 billion yuan (RM111.3bil).
Tax breaks, especially VAT credit rebates, help manufacturing businesses ease their liquidity burdens more directly, as they are eligible to retain rebated tax credits and use them to resume production.
Over the past three years, authorities below national level have helped such businesses streamline their tax reduction and rebate procedures so that they can obtain liquidity as soon as possible.
Song Yulong, head of the finance department at Shandong Xin Shidai Pharmaceutical Co, said the business enjoyed 221 million yuan (RM143mil) in tax and fee cuts last year, including about 6.75 million yuan (RM4.3mil) in VAT credit rebates.
“As a manufacturing and research-centered company, last year was particularly hard for us, as the pandemic kept disrupting production.
“Such a large amount of liquidity not only helped us surmount these challenges, but also enabled us to expand our investment in scientific research,” Song said. —China Daily/ANN
