Businesses hail cuts to corporate tax

Shanghai deputies to the National People’s Congress from the manufacturing and construction sectors reacted positively to corporate tax cuts announced by Premier Li Keqiang yesterday in a government work report.

The current value-added tax rate of 16 percent for manufacturing and other industries will be reduced to 13 percent, while the rate for transportation and construction industries will be lowered from 10 percent to 9 percent, the report said.

Also, the government will cut employers’ contributions to urban workers’ basic aged-care insurance to 16 percent.

As a result, the tax burden and social insurance contributions of enterprises will be reduced by nearly 2 trillion yuan (US$298 billion), the report said.

Tang Liang, CEO of Ossen Group, a Shanghai-based manufacturer of bridge cables, said that the central government has made a concrete step in the reform of tax for businesses, especially for manufacturers.

“The 3-percentage-point drop in the value-added tax rate is a powerful measure to boost the country’s manufacturing sector, especially to us private manufacturers,” he said. “This is very encouraging.”

Li Feng, a purchasing manager of Panda Group, a leading manufacturer of cleaning machines and construction water supply equipment in China, said his company has already benefited from the 1-percentage-point drop in the VAT rate for manufacturers last year. 

“The cost of purchasing at our company has dropped,” he said, adding that the new tax cuts are more promising combined with cuts to social insurance contributions.

Xu Zheng, chairman of Shanghai Construction Group, said the reduced burden to companies in terms of social insurance contributions is “beyond expectations.”

“Not only to the construction industry, the new tax cuts will benefit all aspects of the economy,” he said.