Preferential Tax Policies to Support the Development of Micro and Small Enterprises (2015)

Date: 2016/9/4 22:33:27 Views：

The micro and small enterprises are a crucial component of China’s national economy, but a weak link of social and economic development as well. In recent years and especially since 2014, the SAT has actively carried out the State Council’s decisions, earnestly implemented a series of preferential tax policies to support the development of micro and small enterprises, voluntarily provided the tax service ahead of schedule, and tried all means to get through “the last mile” of policy implementation so that the supportive policies could yield tangible results and support these enterprises in their growth.  

The tax authorities’ active work has reaped the great reputation with micro and small enterprises. According to the survey report of Social Facts & Public Opinion Survey Center of the National Bureau of Statistics, the social group’s “satisfaction” and “basic satisfaction” with the policies to support the development of micro and small enterprises and with the tax reduction and exemption policies for micro and small enterprises were 91.9% and 92% respectively.       

The sample results are nothing abstract, but an overall indicator of reality. Zhang Bin, Research Fellow of National Academy of Economic Strategy of Chinese Academy of Social Sciences, said that “the data are the hard-earned result, implying that the tax authorities have achieved some noticeable effects due to their flexible, innovative, simplified and well-prepared services and their earnest implementation of favorable tax policies.”

More favorable tax policies: “integrated measures” for tax reduction and exemption

Since the start of the financial crisis, the “development of micro and small enterprises” has become a “regular word” on the agendas at the executive meetings of the State Council. All the departments have issued a series of supportive policies at multiple levels including financing support, financial support and streamlining administration approval, and the preferential tax policies have become the highlight. How can we implement the policies properly and effectively? Since 2014, the SAT’s “Spring Campaign for More Convenient Taxation Services” has further transformed functions, streamlined administration and delegated power, struck a balance between delegation and control, and took a set of “integrated measures” for carrying out the favorable tax policies for micro and small enterprises and boosting the social and economic development when different tax types, links and levels are involved. 

As we all know, micro and small enterprises, as a general concept, include small low-profit enterprises to pay enterprise income tax, and small taxpayers and the self-employed people to pay VAT and business tax. In fact, China has never ceased to adjust the favorable tax policies for these enterprises and offer a more vigorous support. 

For favorable tax policies, implementation is the critical and difficult consideration. The SAT constantly gives top priority to the implementation effects, organizes several seminars with the representatives from micro and small enterprises, understands the implementation problems, makes constant efforts to improve management service, and elevates the implementation quality. Every time the tax policy is changed, the SAT will refine the supporting implementation measures in line with the State Council’s regulations so that micro and small enterprises can obtain the sufficient policy supports. For instance, the SAT, based on administration practices, waits for no time to clarify how the tax exemption policies and relevant tax collection and administration policies are used when the tax payment is made on a quarterly basis and different taxable items are involved, changes the enterprise income tax reduction and exemption item of micro and small enterprises from ex ante approval to ex-post recording, further simplifies the tax service process to ease tax difficulties. This item alone has made the favorable tax policy on enterprise income tax available to over 30% more micro and small enterprises.

The hard efforts on implementation can be seen not only in the formulation of supporting policies, but also in each link of management service. For each favorable tax policy, the SAT will introduce the policy interpretation, illustrate the policy and regulation, tax service process, tax declaration requirement and management method, and help taxpayers fully understand and access policy to promote their development. All the local tax organs are directed to understand the tax sources of micro and small enterprises, identify the reasons for slow implementation progress, and voluntarily introduce the relevant policies during the implementation. In 2014, the SAT assigned several tour inspection groups to inspect and supervise the local tax organs’ implementation of favorable tax policies for micro and small enterprises, and incorporated the implementation work into all the tax organs’ performance assessment. 

Since the tax system involves a large variety of participants, the policies are implemented and innovated at the grassroots level. Some tax organs have done satisfactory jobs. The SAT’s Hubei Provincial Office makes full use of such channels as bulletin board, portal, tax service hotline 12366 inside tax service hall, text message reminder and QQ group between tax organs and enterprises, informs each taxpayer of the tax cut policy at the first moment, and fully identifies those “enterprises which haven’t accessed the favorable tax policies”. For example, the SAT’s Yichang Dianjun District Office voluntarily made the favorable tax policies available to 20 qualified micro and small enterprises. Guangdong is the province with the largest number of micro and small enterprises in China. To solve the problem of asymmetric information in preferential tax policies, the SAT’s Guangdong Provincial Office has worked hard to develop the electronic tax declaration system of enterprise income tax, reminding taxpayers through data analysis at back office and automatically calculating the amount of tax reduction and exemption, so that taxpayers will not be troubled by such problems as “hating troubles” and “inability to calculate”. Several local tax authorities have revised the tax declaration software, increased the reminding functions of tax declaration, sorted out the enterprises which haven’t accessed the favorable tax policies on schedule when the tax declaration period expires, and informed all the enterprises concerned of withholding tax during the future tax declaration period.

The “system + technology + service” have constituted a set of effective mechanisms for the implementation of preferential tax policies for micro and small enterprises. Yang Yimin, Director of the SAT’s Goods and Services Taxation Department, said that a vast majority of qualified micro and small enterprises have benefited from the preferential tax policies, with tax burden significantly reduced and much stronger development momentum, increasing employment capacity and gradually reflecting obvious leverage effect of preferential tax policies. According to the survey results of National Bureau of Statistics, the preferential tax policies are playing a noticeable role in supporting the development of micro and small enterprises. The survey report indicates that 92.3% respondents think micro and small enterprises play “a major role” and “a certain role” in optimizing economic structure and increasing employment.

Hu Yijian, Professor of School of Public Economics and Management of Shanghai University of Finance and Economic, said that, “it’s true that our national economy suffers the considerable downward pressure, but employment still achieves the steady growth. In fact, the targeted incentive policy has contributed much to the development of micro and small enterprises. With the policy-oriented incentive measures, those micro and small enterprises are encouraged to play a significant role in providing jobs, boosting entrepreneurship and innovation and removing the transitional problems.”

“I’ve learned a lot about tax policies. In fact, tax was an important consideration before I decided to start this company.” Shi Yingying said, who founded Shanghai Taoxing Property Management Co., Ltd. in 2013. This company is engaged in the property management of residential quarter, and mainly employs cleaners and security personnel, many of whom are laid-off workers. “The company can enjoy the tax reduction and exemption amount of RMB 4,800 for each new employee involved in the reemployment plan. If the company’s annual taxable income is less than RMB 100,000, 50% tax cut is available for its enterprise income tax. In this way, we can reinvest the saved money in the future development.” As a matter of fact, Shi’s plan is totally well-designed. In 2014 alone, the company accessed the tax reduction and exemption amount of over RMB 700,000 for business tax and enterprise income tax. She plans to expand operation and recruit 100 new employees.

The preferential tax policies for micro and small enterprises have yielded some tangible results, but the tax authorities aren’t contented with these results. “The satisfaction in three indicators averages 92%. This result serves as a positive comment on the hard work of tax authorities at all levels for the past year, and also implies that they should work harder to implement these policies.” Liu Lijian, Director of the SAT’s Income Tax Department, has a clear idea about the survey results as provided by the National Bureau of Statistics.

(Source: General Office of the State Administration of Taxation)