Page 206 - 2016_WhitePaper_web
P. 206
6 White Paper on the Business Environment in China
span of 22 days between first publication and the new rule be- port then somewhat obliquely enumerates five points from the
coming effective is rather slimmer than we suspect most compa- 12th Five-Year Plan which aim to improve the position of these
nies involved in the trade would prefer. small- and medium-sized enterprises:
Meanwhile, tariffs on certain imports of high-tech goods 1. Improving the capacity of establishing business and cre-
including, according to Xinhua, “core electronics, high-end ate jobs;
universal chips, basic software, integrated circuit-manufactur-
ing equipment, new generation wireless mobile communication 2. Optimizing the structure of SMEs;
networks, and new drugs for prevention and treatment of some 3. Boosting development of the “new, distinctive, special-
infectious diseases such as AIDS and hepatitis,” were removed
on the same day that the refund elimination occurred in order ized and sophisticated” industries and the industrial
to “encourage research and development in the nation’ s major conglomerates;
strategic products, core technologies and major projects”.22 4. Upgrading enterprise management level;
5. Refining the service system of SMEs.23
On June 30, 2014, China’s top leaders endorsed a program
of reform to the nation’s tax system, budgeting practices and fis- Tax Cuts for Small Businesses
cal relations. While details have not yet been disclosed, it was Less than two weeks after that report, Xinhua cited the Min-
stated, the World Bank reports, that “broad objectives for fiscal
and tax reforms in the Third Plenum decisions are: Public fi- istry of Finance as announcing a series of tax relief policies to
nance is the foundation and a critical pillar for state governance. “benefit the nation’s crisis-hit small and micro-sized firms—in-
A scientifically designed fiscal and tax regime is the institution cluding street vendors—and also help curb inflation,” includ-
that guarantees resource allocation optimization, market unifi- ing raising the threshold for VAT and business taxes to 5,000
cation, social equality, and long-lasting security and peace for through 20,000 yuan as well as abolishing the stamp tax on
a nation.” In the same World Bank report, Minister of Finance loans from financial institutions until October 31, 2014.24
Lou Jiwei states that the deadline for major reform tasks con-
cerning the fiscal and tax system will be completed by 2016, and Small to medium size businesses benefited further from
that China aims to have a fully developed modern fiscal system preferential tax policies issued later by the government. Ac-
by 2020. The World Bank is of the opinion that “this will not cording to a China Briefing report by Dezan Shira & Associ-
be minor amendments to current policies; but rather will in- ates, “on April 8, the Ministry of Finance (MOF) and the State
volve systemic restructuring and institutional innovation”. The Administration of Taxation (SAT) issued an ‘Announcement
Finance Minister has stated that “the years 2014 and 2015 will on Preferential Income Tax Policies for Small and Low-Profit
be vital in pushing forward the reforms.”25 Enterprises’. Based on the Announcement, small and low-profit
enterprises with a taxable income not exceeding RMB100,000
According to the China Briefing, China’s massive reform to (US$16,130) should pay corporate income tax at the rate of 20
replace business taxes (BT) with a revamped value-added tax percent on only 50 percent of their taxable income. The prefer-
(VAT), which started in 2012 as a trial program, is expected ential policy is effective from January 1, 2014 to December 31,
to expand to three crucial sectors by end of 2015 – real estate, 2016.”26
finance, and consumer services. The targets for the future of
VAT reform in China are contained in the 12th Five Year Plan Made in China 2025
Period (2011-2015), which stipulates that all sectors currently In May 2015, the State Council approved “Made in China
subject to BT should be switched over to VAT by the end of
2015. The State Council had announced in May that the VAT 2025”, a scheme that will use mandates, subsidies and other
reform would be expanded to include construction, real estate, methods to persuade manufacturers to upgrade their facto-
financial services and ‘life’ services. The Ministry of Finance also ries. According to a 2015 Economist Special Report on China
recently laid out a draft reform plan involving these sectors. 27 Business, its “immediate aims are to improve quality, productiv-
ity and digitisation, and to expand the use of numerically con-
A Growth Plan for SMEs in the 12th Five-Year Plan trolled machines, involving policies to encourage the adoption
On September 22, 2011, a national “Growth Plan for of robotics, 3D printing and other advanced techniques.” The
plan is for China to become a green and innovative “world man-
SMEs” was released to bolster a critical—and yet underprivi- ufacturing power” by 2025. 28
leged—part of the Mainland’s economy.
According to Xinhua, “SMEs contribute to 60 percent of
China’s industrial output and create 80 percent of the country’s
jobs” and yet have historically had fewer options for support
from the government than state-owned enterprises. The re-
206
span of 22 days between first publication and the new rule be- port then somewhat obliquely enumerates five points from the
coming effective is rather slimmer than we suspect most compa- 12th Five-Year Plan which aim to improve the position of these
nies involved in the trade would prefer. small- and medium-sized enterprises:
Meanwhile, tariffs on certain imports of high-tech goods 1. Improving the capacity of establishing business and cre-
including, according to Xinhua, “core electronics, high-end ate jobs;
universal chips, basic software, integrated circuit-manufactur-
ing equipment, new generation wireless mobile communication 2. Optimizing the structure of SMEs;
networks, and new drugs for prevention and treatment of some 3. Boosting development of the “new, distinctive, special-
infectious diseases such as AIDS and hepatitis,” were removed
on the same day that the refund elimination occurred in order ized and sophisticated” industries and the industrial
to “encourage research and development in the nation’ s major conglomerates;
strategic products, core technologies and major projects”.22 4. Upgrading enterprise management level;
5. Refining the service system of SMEs.23
On June 30, 2014, China’s top leaders endorsed a program
of reform to the nation’s tax system, budgeting practices and fis- Tax Cuts for Small Businesses
cal relations. While details have not yet been disclosed, it was Less than two weeks after that report, Xinhua cited the Min-
stated, the World Bank reports, that “broad objectives for fiscal
and tax reforms in the Third Plenum decisions are: Public fi- istry of Finance as announcing a series of tax relief policies to
nance is the foundation and a critical pillar for state governance. “benefit the nation’s crisis-hit small and micro-sized firms—in-
A scientifically designed fiscal and tax regime is the institution cluding street vendors—and also help curb inflation,” includ-
that guarantees resource allocation optimization, market unifi- ing raising the threshold for VAT and business taxes to 5,000
cation, social equality, and long-lasting security and peace for through 20,000 yuan as well as abolishing the stamp tax on
a nation.” In the same World Bank report, Minister of Finance loans from financial institutions until October 31, 2014.24
Lou Jiwei states that the deadline for major reform tasks con-
cerning the fiscal and tax system will be completed by 2016, and Small to medium size businesses benefited further from
that China aims to have a fully developed modern fiscal system preferential tax policies issued later by the government. Ac-
by 2020. The World Bank is of the opinion that “this will not cording to a China Briefing report by Dezan Shira & Associ-
be minor amendments to current policies; but rather will in- ates, “on April 8, the Ministry of Finance (MOF) and the State
volve systemic restructuring and institutional innovation”. The Administration of Taxation (SAT) issued an ‘Announcement
Finance Minister has stated that “the years 2014 and 2015 will on Preferential Income Tax Policies for Small and Low-Profit
be vital in pushing forward the reforms.”25 Enterprises’. Based on the Announcement, small and low-profit
enterprises with a taxable income not exceeding RMB100,000
According to the China Briefing, China’s massive reform to (US$16,130) should pay corporate income tax at the rate of 20
replace business taxes (BT) with a revamped value-added tax percent on only 50 percent of their taxable income. The prefer-
(VAT), which started in 2012 as a trial program, is expected ential policy is effective from January 1, 2014 to December 31,
to expand to three crucial sectors by end of 2015 – real estate, 2016.”26
finance, and consumer services. The targets for the future of
VAT reform in China are contained in the 12th Five Year Plan Made in China 2025
Period (2011-2015), which stipulates that all sectors currently In May 2015, the State Council approved “Made in China
subject to BT should be switched over to VAT by the end of
2015. The State Council had announced in May that the VAT 2025”, a scheme that will use mandates, subsidies and other
reform would be expanded to include construction, real estate, methods to persuade manufacturers to upgrade their facto-
financial services and ‘life’ services. The Ministry of Finance also ries. According to a 2015 Economist Special Report on China
recently laid out a draft reform plan involving these sectors. 27 Business, its “immediate aims are to improve quality, productiv-
ity and digitisation, and to expand the use of numerically con-
A Growth Plan for SMEs in the 12th Five-Year Plan trolled machines, involving policies to encourage the adoption
On September 22, 2011, a national “Growth Plan for of robotics, 3D printing and other advanced techniques.” The
plan is for China to become a green and innovative “world man-
SMEs” was released to bolster a critical—and yet underprivi- ufacturing power” by 2025. 28
leged—part of the Mainland’s economy.
According to Xinhua, “SMEs contribute to 60 percent of
China’s industrial output and create 80 percent of the country’s
jobs” and yet have historically had fewer options for support
from the government than state-owned enterprises. The re-
206
