Tax reform to reduce costs of Chinese enterprises

Special Report:Global Financial Crisis

BEIJING, Nov. 11 (Chinese media) -- China's new tax reform will

ease the tax burden for the country's small and medium enterprises, and revive

and enhance their healthy development, experts told Chinese media on Tuesday.

The Chinese government announced a long-awaited tax

reform on Monday, under which companies will no longer pay value-added tax (VAT)

for equipment purchases.

It would reduce the tax burden on companies and save

them an estimated 120 billion yuan (17.59 billion U.S. dollars) a year, the

biggest cut ever, said officials from the Ministry of Finance (MOF) and State

Administration of Taxation.

In 2007, the VAT revenue exceeded 1.5 trillion yuan,

accounting for 31 percent of the total tax income.

Under the reform, VAT exemptions for exempted

imported equipment and VAT rebates for foreign companies buying made-in-China

would be both abolished.

Zhang Bin, researcher at the Institute for Finance

and Trade Economics of Chinese Academy of Social Sciences, said the reform put

foreign and domestic companies on an equal footing.

MOF fiscal science institute director Jia Kang said

the reform would encourage enterprises to improve equipment and technology, and

push them to become the main body of long-term market investment.

Renmin University of China Professor An Tifu said the

sound development of small and medium enterprises would offer more job

opportunities.

Xie Baijun, chairman at a Zhenjia-based

thermo-electric company, said the reform would help pare costs on technological

upgrades.

His company's annual investment stood at 20 million

to 30 million yuan. Two million to 3 million in taxes would be cut after the

reform.

Ten million yuan would be saved from a

100-million-yuan project, which could be used to further expand investment, he

added.

The reform on VAT was proposed as early as 2003. The

11th Five-Year plan set the goal of shifting from a production-based to a

consumption-based VAT regime from 2006 to 2010.

In 2004, the tax reform was piloted in eight

industries, including equipment manufacturing and the chemical and oil industry

in the northern Heilongjiang, Jilin and Liaoning Provinces.

From July 2007, the trial was extended to eight

industries, including power and excavating sectors in 26 traditional industrial

bases in the six central provinces.

In July this year, quake-hit areas in Sichuan

Province and five cities in Inner Mongolia Autonomous Region were covered.

Zhang said the reform had to be gradually implemented

to prevent economic overheating.

However, due to the global economic downturn,

concerns over falling investment emerged. The policy would stimulate investment

and boost business development.

MOF officials said the ongoing financial crisis had a

negative impact on the real economy. The extension of the reform nationwide

would empower companies, increase competitiveness and enhance their

risk-resistance. It would cushion the blow incurred by the worsening world

economy.

China's central bank reiterates credit

support for small business and rural

banking

BEIJING, Oct. 23 (Chinese media)

-- China's central bank said on Thursday it would continue to encourage

commercial lenders to extend credit support to small enterprises and rural

banking to sustain the stable and rapid development of the national economy. Full story