If China reduces value-added tax and corporate income tax

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      Bank of America Merrill Lynch, an investment bank, reported that if China were to reduce the value-added tax and corporate income tax rates as previously reported by the Mainland official media, it would reduce the total corporate tax by about 910 billion yuan in 2017, or about 5% of the government's overall fiscal revenue (excluding land sales); assuming other factors remain unchanged, Corporate profits will rise by about 4%.
Bank of America Merrill Lynch said a Mainland expert quoted in People's Daily's Wechat Public Document earlier said that China could cut its value-added tax and corporate income tax rates in the coming months, with the current 16% VAT rate being reduced to 14%, 10% VAT rate to 9%, and the 6% tax rate remaining unchanged. In addition, the standard corporate income tax may be reduced from 25% to 22%.
According to the report, lowering the tax rate will reduce government revenue by 5%, while corporate profits will increase by about 4%. The impact of tax cuts on some sectors may be more meaningful. According to the disclosure of A-share listed companies, the top 10 sectors of total payment/pre-tax profits (including value-added tax, corporate income tax, consumption tax and other taxes) are oil, telecommunications, personal care, food retail, real estate, coal, new energy, etc. Independent power plants, aviation and other machinery and equipment industries.
Among these industries, the report believes that industries dominated by state-owned enterprises, which apply 16% VAT and higher actual corporate income tax, will benefit most from tax cuts, such as oil, coal and independent power plants, but cannot quantify the impact because they do not disclose details according to the type of tax they pay.
Liu Kun, China's finance minister, said earlier this month that the next step would be to strengthen the fiscal policy to reduce the burden; to fully implement the tax and fee reduction policy that has been introduced; and to study more large-scale tax cuts and more obvious measures to reduce fees, so as to really let enterprises play light and let go.


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