When someone shares with you something of value, you have an obligation to share it with others.
Tuesday, 11 November 2008
VAT reform ‘barely helpful’ to small firms
Beijing’s long-awaited reform of the value-added tax (VAT) might not be enough to provide a significant boost to the country’s battered small and medium-sized enterprises, taxation professionals and entrepreneurs said yesterday.
Martin Zhou in Beijing and Denise Tsang 11 November 2008
Beijing’s long-awaited reform of the value-added tax (VAT) might not be enough to provide a significant boost to the country’s battered small and medium-sized enterprises, taxation professionals and entrepreneurs said yesterday.
They said the new scheme, which amounts to a 123.3 billion yuan (HK$140 billion) tax cut and will take effect from January, would mostly benefit the country’s largely state-controlled heavy manufacturing industries.
Under the scheme, VAT, the central government’s single largest source of tax revenue, will be changed from production-based to consumption-based, making spending on fixed assets such as machines and equipment tax-deductible.
“Under the current economic climate, the change for sure provides relief and might well add vitality to stagnant domestic investment,” said Alfred Shum, an executive partner at Ernst & Young China.
“The incentive applies to bigger players in capital-intensive heavy industries more than the service industry, which comprises a significant portion of mainland SMEs.
“Even for the manufacturing SMEs, the scheme means little, as very few of them now have the cash power to expand their production.”
Mr Shum said that for smaller companies an increase in export tax rebates would be more helpful than the VAT change.
The authorities charge VAT at between 3 per cent and 17 per cent, depending on the industry. Imports by manufacturers, such as machinery, are subject to heavier taxation.
Beijing ran a trial on the consumption-based VAT system in the northeast province of Liaoning and in Inner Mongolia in 2004 but has not approved an across-the-board implementation for fear of excessive investment.
Some mainland-based Hong Kong manufacturers welcomed the change but called for further cuts to help them cope with the rapidly deteriorating operating environment.
Chinese Manufacturers’ Association vice-president Lo Fu-cheong said a simplified regime and lower VAT would reduce investors’ burden and encourage production automation and technology advancement.
“It will be helpful if import duties and VAT of imported machineries are waived altogether,” said Mr Lo.
He said many manufacturers baulked at an average duty of 20 per cent on imported equipment and machinery and a 17 per cent VAT, which together constituted a levy of as much as 37 per cent.
“A lot of manufacturers have been forced to buy mainland-made machinery, of which the quality is lower,” Mr Lo said.
Ting Siu-kwan, chairman of the 300-member Hong Kong Metal Merchants Association, said the tax burden would be relieved substantially if the VAT on raw materials, which may amount to more than 17 per cent, was scrapped.
1 comment:
VAT reform ‘barely helpful’ to small firms
Martin Zhou in Beijing and Denise Tsang
11 November 2008
Beijing’s long-awaited reform of the value-added tax (VAT) might not be enough to provide a significant boost to the country’s battered small and medium-sized enterprises, taxation professionals and entrepreneurs said yesterday.
They said the new scheme, which amounts to a 123.3 billion yuan (HK$140 billion) tax cut and will take effect from January, would mostly benefit the country’s largely state-controlled heavy manufacturing industries.
Under the scheme, VAT, the central government’s single largest source of tax revenue, will be changed from production-based to consumption-based, making spending on fixed assets such as machines and equipment tax-deductible.
“Under the current economic climate, the change for sure provides relief and might well add vitality to stagnant domestic investment,” said Alfred Shum, an executive partner at Ernst & Young China.
“The incentive applies to bigger players in capital-intensive heavy industries more than the service industry, which comprises a significant portion of mainland SMEs.
“Even for the manufacturing SMEs, the scheme means little, as very few of them now have the cash power to expand their production.”
Mr Shum said that for smaller companies an increase in export tax rebates would be more helpful than the VAT change.
The authorities charge VAT at between 3 per cent and 17 per cent, depending on the industry. Imports by manufacturers, such as machinery, are subject to heavier taxation.
Beijing ran a trial on the consumption-based VAT system in the northeast province of Liaoning and in Inner Mongolia in 2004 but has not approved an across-the-board implementation for fear of excessive investment.
Some mainland-based Hong Kong manufacturers welcomed the change but called for further cuts to help them cope with the rapidly deteriorating operating environment.
Chinese Manufacturers’ Association vice-president Lo Fu-cheong said a simplified regime and lower VAT would reduce investors’ burden and encourage production automation and technology advancement.
“It will be helpful if import duties and VAT of imported machineries are waived altogether,” said Mr Lo.
He said many manufacturers baulked at an average duty of 20 per cent on imported equipment and machinery and a 17 per cent VAT, which together constituted a levy of as much as 37 per cent.
“A lot of manufacturers have been forced to buy mainland-made machinery, of which the quality is lower,” Mr Lo said.
Ting Siu-kwan, chairman of the 300-member Hong Kong Metal Merchants Association, said the tax burden would be relieved substantially if the VAT on raw materials, which may amount to more than 17 per cent, was scrapped.
Post a Comment