China slashes $16 billion VAT in one month

China's latest value-added tax (VAT) cuts have slashed more than 110 billion yuan (16 billion U.S. dollars) worth of taxes in the first month of new VAT policies which took effect April 1. Briefing the media on Thursday, China's tax authority says the manufacturing sector remains the biggest beneficiary, accounting for some 40 percent of the reductions.

The VAT rate for Chinese manufacturers has dropped from 16 to 13 percent. Meanwhile, other industries like the postal service, telecommunications and consumer services enjoy a 10 percent additional input VAT deduction before the end of 2021.

Apart from VAT reform, business taxes for small and micro enterprises have also been largely reduced starting this year. Officials say more than 20 million small and micro businesses no longer need to pay taxes due to the preferential policies.

China is now launching a fresh round of tax reforms both for businesses and individuals. Authorities say a total of 500 billion yuan worth of taxes have been cut nationwide in the first four months of the year.

“The latest tax cuts have to a large extent boosted investment in China‘s high-tech manufacturing and service sectors, especially in the research and development area. Based on our survey, manufacturers' RD expenses also increased in the first four months. Another major beneficiary here is the small and micro businesses, which will in turn help stimulate our entrepreneurship and innovation, said Fu Shulin, spokesperson for State Taxation Administration of China.

(CGTN)