Proactive policies help hard-hit market players with large-scale tax refunds
China is considering additional fiscal policy support while making a full effort to put in place existing measures, providing a strong buffer against downward pressures on the domestic economy, officials and experts said on Tuesday.
They added that large-scale tax refunds started flowing to hard-hit market participants in the first four months of the year, an indication of the government’s proactive fiscal policy.
“Policies on all fronts are being implemented at a faster pace,” Xu Hongcai, vice finance minister, said at a press conference on Tuesday.
The ministry will intensify its efforts to formulate additional policy tools, strengthen adjustments and strengthen the role of fiscal policy in stabilizing the economy as it strives to achieve this year’s economic and social development goals. , said Mr. Xu.
Specifically, the implementation of favorable tax and tariff policies has helped energize market players by reducing the tax and tariff burden on businesses and increasing their cash flow by more than 1.6 trillion yuan ($236.8 billion). ) so far this year, Xu added.
The country began large-scale refunds of value-added tax credits to small and micro enterprises in April, when about 800 billion yuan was refunded, accounting for more than a third of the country’s tax revenue in April. 2021, according to official data.
With tax refunds equating to reduced tax revenue, China’s tax revenue fell 4.8 percent year on year to about 7.43 trillion yuan in the first four months, the finance ministry said Tuesday. .
Su Jingchun, an associate professor at the Chinese Academy of Fiscal Sciences, said the decline in tax revenue underscores the difficulties felt acutely by market participants, particularly in the manufacturing sector.
“The bottleneck in supply and logistics chains caused by the recent resurgence of COVID-19 in Shanghai and the surrounding region is a major issue facing manufacturers, affecting trade growth and the overall economy,” she said. “That added to the constraints of tax revenue growth.”
Against such a backdrop, industry experts have said that the additional fiscal and monetary measures being considered by the government are key to achieving this year’s economic development goals, with the issuance of special treasury bonds being one of the options. sensible.
The country will speed up tax refunds which can directly boost businesses’ cash flow and ease their financial difficulties, Xu said, adding that refunds of outstanding VAT credits to medium and large enterprises will start earlier than expected in May. and June, respectively. .
Xu added that the ministry is accelerating the issuance of local government special bonds to boost investment and step up efforts to help enterprises facing serious difficulties, such as easing pressure from social insurance contributions.
Gao Ruidong, chief economist at Everbright Securities, said possible options for new fiscal tools include increasing this year’s budget deficit and issuing special treasury bills, which can help stabilize players’ operations. of the market, to supplement local fiscal capacities and to support the construction of key projects. .
“The COVID-19 surge has affected both household consumption and private investment. Faster fiscal policy to support infrastructure investment will play an important role in keeping aggregate demand stable,” Gao said.
Fiscal policy intensified its efforts to stabilize investment growth. A total of 1.5 trillion yuan of local government special bonds were issued on Sunday. Bonds issued supported more than 11,000 investment projects as of the end of April, according to official data.
Chinese lenders recorded net foreign exchange purchases of $19 billion in April, roughly the same level as the average monthly level seen in the first quarter and significantly higher than the same period last year. supported by dynamic cross-border flows related to trade and abroad. direct investments, the State Administration of Foreign Exchange announced on Tuesday.