New tax cuts set to rev up the economy

New tax cuts to boost the economy were announced after a State Council executive meeting on Thursday, along with a commitment to ensure full implementation of all existing tax reduction measures.

Premier Li Keqiang, who presided over the meeting, noted that tax and fee cuts made earlier this year have kicked in to support small and micro businesses and spur innovation.

"In the context of new developments both at home and abroad, tax and fee cuts are important for sustaining the positive momentum of steady economic growth," Li said. "More tax incentives should be rolled out and all introduced measures should be fully delivered. Tax and fee reductions are part and parcel of a proactive fiscal policy, and something that we are capable of doing now."

It was decided at the meeting that more steps should be taken to support the economy while existing measures are being implemented.

Companies that have halted production or suspended business as a result of requirements to cut overcapacity or restructure will see their real estate taxes and urban landuse taxes reduced or exempted. Investment businesses for social security funds and basic pension insurance funds will also get a tax break.

To provide incentives to lend money to smaller companies, loans to micro, small and individually owned businesses will be eligible for a value-added tax exemption on interest revenue. The credit limit for such loans will be raised from 5 million yuan ($727,000) to 10 million yuan between Sept 1 this year and the end of 2020.

Corporate income tax and the value-added tax on foreign institutions' interest gains in onshore bond market investments will be exempted for three years to promote greater opening-up and attract overseas capital, it was decided. Export rebate rates for some products will be also be improved.

The incentives are expected to cut the corporate tax burden by more than 45 billion yuan this year.

"A thriving business community is vital for creating jobs, sustaining growth, increasing fiscal revenues and anchoring market expectations," Li said. "Tax and fee reductions will send a positive signal. All new measures in tax and fee cuts must be implemented without delay."

He called for working out additional steps for tax and fee reductions to bring benefits to enterprises and families.