Are nominal tax cuts really helping Chinese enterprises?
03 December, 2018
Enterprises in China are still complaining about their tax burden following the government’s 1.3-trillion-yuan (US$190 billion) tax cut because they are using different standards to measure the cut, Yicai.com reported on Monday.
The Chinese government cuts taxes by reducing the statutory or nominal tax rates, while enterprises measure the actual tax burden by comparing the amount they have to pay before and after the tax cut, said Liu Shangxi, Dean of Chinese Academy of Fiscal Sciences.
The gap between the taxes enterprises should pay and actually pay is mainly caused by the tax collection department’s lack of ability to collect tax and taxpayers’ failure to comply with tax laws, Liu pointed out. There is also another factor, such as various kinds of tax rebates offered by local governments, Liu added.
Hu Yijian, a professor at the Shanghai University of Finance and Economics, urged the government to cut the actual tax burden for enterprises rather than lowering just the nominal tax burden.
Meanwhile, companies are facing increasing difficulties and a sharp drop in profits, and the prevailing tax cuts may be largely insignificant in saving them from these economic hurdles.
Taking this into account, many enterprises can’t really rely on the government tax cuts to foster development or improve operational capacity, the report said.