Beijing expected to make bold tax adjustments next year
Woods Lee in Beijing 12 December 2008
Beijing will most likely take bolder steps to cut taxes next year as it boosts household and corporate incomes to avoid a sharp economic slowdown.
The most likely changes are an increase in the threshold of personal income taxes, tax incentives to encourage home purchases and other measures to lighten the tax burden on companies, analysts said.
The just-ended national economic work conference in Beijing promised to stimulate the economy with “active fiscal policies, moderately loose monetary policies and a structural tax reduction”.
“By ‘active fiscal policies’, the government is certainly not just referring to big fiscal spending, they should also include reasonable tax cuts,” said Qu Hongbin, a senior economist at HSBC Holdings in Hong Kong.
Although the economic conference did not provide details, analysts widely translated the “structural tax reduction” as a signal for more bold tax cuts, although they would be targeted at different social groups, industries and regions.
“The so-called structural tax cut might sound vague, because it is not a standard term in economics textbooks, but we can surely draw from it a signal for more tax cuts,” said Zuo Xiaolei, chief economist with Beijing-based Galaxy Securities.
With exports slowing, Beijing is seeking to shift to domestic consumption and substantial government fiscal spending, to boost the economy.
“Raising the threshold of personal income taxes and offering some tax incentives for housing purchases will not only directly boost household incomes but will also lend some vitality to the dormant housing market,” said China International Capital Corp economist Ha Jiming.
The level at which personal income taxes are levied on the mainland is seen as overly low and has been blamed for putting pressure on low and medium-income families, greatly dampening their willingness to buy. Economists are proposing an increase in the personal income tax threshold to 3,000 yuan (HK$3,393) per month from 2,000 yuan, with some even more radical suggestions of 8,000 or 10,000 yuan.
Small and medium-sized enterprises were another sector most likely to enjoy tax cuts, analysts said.
SMEs, which contribute more than 60 per cent of economic output and nearly 80 per cent of jobs, could help the country ride out the looming downturn.
Earlier media reports said the government was mulling slashing business taxes for commercial banks to 4 per cent from 5 per cent to support their performance.
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Beijing expected to make bold tax adjustments next year
Woods Lee in Beijing
12 December 2008
Beijing will most likely take bolder steps to cut taxes next year as it boosts household and corporate incomes to avoid a sharp economic slowdown.
The most likely changes are an increase in the threshold of personal income taxes, tax incentives to encourage home purchases and other measures to lighten the tax burden on companies, analysts said.
The just-ended national economic work conference in Beijing promised to stimulate the economy with “active fiscal policies, moderately loose monetary policies and a structural tax reduction”.
“By ‘active fiscal policies’, the government is certainly not just referring to big fiscal spending, they should also include reasonable tax cuts,” said Qu Hongbin, a senior economist at HSBC Holdings in Hong Kong.
Although the economic conference did not provide details, analysts widely translated the “structural tax reduction” as a signal for more bold tax cuts, although they would be targeted at different social groups, industries and regions.
“The so-called structural tax cut might sound vague, because it is not a standard term in economics textbooks, but we can surely draw from it a signal for more tax cuts,” said Zuo Xiaolei, chief economist with Beijing-based Galaxy Securities.
With exports slowing, Beijing is seeking to shift to domestic consumption and substantial government fiscal spending, to boost the economy.
“Raising the threshold of personal income taxes and offering some tax incentives for housing purchases will not only directly boost household incomes but will also lend some vitality to the dormant housing market,” said China International Capital Corp economist Ha Jiming.
The level at which personal income taxes are levied on the mainland is seen as overly low and has been blamed for putting pressure on low and medium-income families, greatly dampening their willingness to buy. Economists are proposing an increase in the personal income tax threshold to 3,000 yuan (HK$3,393) per month from 2,000 yuan, with some even more radical suggestions of 8,000 or 10,000 yuan.
Small and medium-sized enterprises were another sector most likely to enjoy tax cuts, analysts said.
SMEs, which contribute more than 60 per cent of economic output and nearly 80 per cent of jobs, could help the country ride out the looming downturn.
Earlier media reports said the government was mulling slashing business taxes for commercial banks to 4 per cent from 5 per cent to support their performance.
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