The State Council held its weekly policy briefing on Feb 27, focusing on streamlining administration, handling relations between the government and the market and the latest executive meeting.[Photo by Wang Zhuangfei/China Daily]
Hu Kaihong (host):
Good morning ladies and gentlemen. Happy new year and welcome to the State Council policy briefing. Today’s briefing has two parts, first we will have the head of the State Council Office of the Government Examination and Approval System Reform Wu Zhilun, Xie Xuezhi, deputy director of the State Administration of Taxation and Liu Yuting, deputy head of the State Administration for Industry and Commerce to brief us on further streamlining administration and delegating power to lower levels, as well as handling relations between the government and the market. They will take questions.
For the second part, Vice-Minister of the Ministry of Finance Shi Yaobin and Deputy Director Xie Xuezhi will brief us about the State Council Executive Meeting held on Feb 25, which focused on cutting taxes and fees, supporting development of small and micro-businesses as well as innovation. They will also take questions. Now we give the floor to Mr Wu.
Good morning, everyone. You’re welcome to use the materials I provided as reference. I would like to point out one more thing. In early 2013, administrative reviews and approvals were required from State Council departments concerning 1,700 items. The office has carried out checks and validations by removing internal management procedures, repetitions, and adding those which actually required review and approval but were not included earlier, to form a final list of 1,526 items currently under the review and approval of State Council departments. I am open for questions now.
Now let’s give the floor to Mr Xie.
We have also offered some background information materials to you. I will just sum up the work we have done in five respects. First, streamlining approval procedures. We have released all the 87 tax administrative approval items, building a foundation for further work and establishing better management. Second, we have formulated plans, under the State Council Office of the Administrative Review and Approval Reform, to streamline non-administration approvals. Third, reducing the approvals. In 2014, we canceled 45 tax administration approvals, which account for over 50 percent of the total 87. Fourth, to enhance post-management work. Canceling approval procedures does not mean no management at all but a way to adjust and improve the process. Fifth, to offer guidance to the tax authorities at all levels. In 2015, we will step up efforts and continue to push forward the reform on the administrative approval system.
Thank you Mr Xie. Now let’s invite Mr Liu.
Good morning. When the public consider the State Administration for Industry & Commerce one of their major focuses is the reform of the business system, or how the reform helps with efforts to streamline administration and delegate power to lower levels.
Tomorrow will be the last day of February. The reform of the business system began with registered capital reform, which started on March 1 last year. Measures approved by the State Council, such as easing regulations for market access by changing the system of actual paid-in registered capital to a commitment to pay registered capital, relaxing registered capital thresholds and simplifying the domicile registration for market players, have been fully implemented. Another important item of the reform — to change the system of an annual business inspection to a system of annual reporting — has been completed at a preliminary level.
Another item — implementing electronic registration and management and issuing digital business licenses — is being tested in pilot programs.
I believe people have found in the past several years that the market has been basically stable and continues to improve. Thank you for your attention to, and support for, the reform of the business system.
Thank you Mr Liu. Now we start taking questions.
I have two questions, and the first one goes to Mr Wu. We noticed the change from ex-ante (before the event) to ex-post review and approval, but some of the reviews and approvals that used to be done by the government has been quietly transferred to some intermediary services. Nothing can be achieved unless through these organizations. So what do you think of this change? Are there any measures in the reform to address this issue? The second question goes to the Ministry of Finance or the State Administration of Taxation. We noticed the Japanese media’s reports about a Chinese spending spree in Japan during the Spring Festival. It is estimated that around 6 billion yuan was spent in a few days. The tax rate on luxury commodities has been discussed for years among the public. Are there any considerations to cut the tax and keep the purchasing power at home? Thank you.
When those who are responsible for reviews and approvals find difficulties in judging some technical issues, they turn to intermediary services for help. This is not a problem. What people are discussing are some problems concerning these intermediary services, such as arbitrary charges, delays and low-quality reports issued by them. We once saw a report whose name on the cover page was just changed from A to B intermediary service, without anything changed in the content when it was submitted. We have always paid attention to this issue. How to address it? I’m afraid that it is not feasible to say these intermediary services are not necessary. But how to manage them? Many of them are enterprises and public institutions, and some are societies. Those who pay them should manage them, but today’s problems are that those who pay them for consultation or evaluation are in a difficult position. They also find it difficult to change a service as another one may not work. Such problems do exist. Therefore, the key is not about the intermediary services, but the threads of connection between intermediary services and those who are responsible for reviews and approvals. I think there are two ways to address the problem. The first one is to cut such connections and the second one is to make such connections public. Cutting means these public institutions or enterprises must be independent from related departments. Or, those who are responsible for review and approval pay for the services. Efforts to improve the services are going on and relevant measures will emerge. Thank you.
The question the reporter just raised is, firstly, a good subject. It shows the rise of Chinese income and purchasing power, so the consumption of tourists going abroad has increased. Of course, some questions followed saying why not keep these consumers at home to boost domestic consumption. I think this question is not so easy. I have not analyzed the product variety of the 6 billion-yuan consumption. It is likely that some of them are luxury products and some of them may be the necessities of life. I heard some Chinese went to Japan to buy products like toilet seats. Toilets seats are not yet enlisted for consumption tax levying.
Now the consumption taxes are levied over a dozen items of certain products. One of them is luxurious products which average income people might not be able to buy. Consumption tax is levied on those high-consumption people to balance the income gap. Another category is those
products with spill-over effects, which might have negative influences over society and the environment. For instance, gasoline, diesel, rubber, firecrackers. For these products which have negative effects over the environment, we need to manage the consumption through tax. Therefore, not all those products bought overseas belong to these categories. Some people hope that the consumption tax or tariffs will be lowered or even suspended, so that all these products can be imported and sold at a domestic price. Will people stop going abroad and buying products overseas then? I don’t think so.
When we go overseas, we go for sightseeing possibly buying some gifts for relatives and friends at home even if they are a little bit expensive. What matters is whether the product is of good quality or not. I don’t think that taxation can turn this around. We, together with the tax authorities, are concerned about the point that you mentioned, and we will continue to track these problems. Hopefully we can bring out polices and measures that go in line with taxation rules while matching consumption habits. Thanks.
China News Service:
Director Wu, what will be the considerations for streamlining foreign-related administrative approval items?
There are indeed some approval items which are related with foreigners or foreign affairs. We canceled and delegated more than 240 items last year, and more than 10 percent of them were foreign-related. Of those, 27 items were directly foreign related. In the new year, foreign related items are still our focus of reform. Thanks.
China Radio International:
I would like to ask Mr Liu about the demanding problems that have emerged during the yearlong reform of the business system and the corresponding measures. Thank you.
With the reform, we generally achieved a major breakthrough, such as successfully further stimulating the vitality and development momentum of the market, allowing the number of market entities to rise sharply. The reform has made a positive contribution to public entrepreneurship and mass innovation.
Along with the nationwide implementation of the business system reform from March 1, 2014 to Feb 25, 2015, we have seen registration of 13.3 million new market entities across the country, a year-on-year increase of 17.67 percent. Of the new entities, there are 3,807,800 enterprises, a growth of 48.87 percent, which means a daily registration figure of 10,400. There are 3,769,400 new domestic enterprises, a growth of 49.45 percent, which includes 3,601,600 private enterprises representing a growth of 51.21 percent. There are 38,300 newly registered foreign investment enterprises, an increase of 7.56 percent and there are 9,232,400 individual businesses newly registered, a growth of 8.94 percent. Farmers cooperatives have seen 295,800 new entities registered, a decline of 1.58 percent.
As of Jan, 2015, there are altogether 70,176,400 market entities across the country. As of Feb 25, the figure is 70,765,600. Of these, there are 18,698,700 enterprises, a year-on-year increase of 20.94 percent. The enterprises with domestic investment account for 18,232,900, showing a growth of 21.43 percent, and 15,964,400 of them are privately-owned, an annual increase of 25.23 percent. The enterprises with foreign investment have increased by 4.44 percent to 465,800. The individual businesses account for 50,729,800, a growth of 13.23 percent. Farmers cooperatives account for 1,337,100, an increase of 28.71 percent.
Second, the reform boosted the optimization of the structure of industries. Among the newly established enterprises in 2014, those among the tertiary industries have increased by 50.03 percent, easily outstripping the increase of those in the secondary industries — 29.72 percent.
The enterprises in the tertiary industries have taken a represent a greater share of all businesses-78.72 percent. The reform has played a significant role in boosting the thriving emerging sectors. The country has seen 146,700 enterprises newly registered with a focus on information transmission, software and information technology and services, a year-on-year increase of 97.87 percent.
The cultural, sports and entertainment sectors have witnessed 65,900 new enterprises registered, an increase of 83.51 percent. The scientific research and technological services sectors have witnessed 262,600 new enterprises registered, a growth of 70.32 percent.
Three, the reform has contributed to the construction of social credit system. With the launching of the National Enterprise Credit Information Publicity System, any groups, organizations or individuals have convenient, timely and comprehensive access to corporate information, and public supervision over the entities has been remarkably expanded. With the implementation of the provisional regulation about enterprise information publicity, there is a steady growth in the number of enterprises making public their annual reports and releasing information quickly. As off Feb 15, 2015, there have been 7,191,700 enterprises submitting or releasing their annual reports for 2013, accounting for 48.90 percent of all the requested enterprises. Selective examination conducted by the localities about the enterprises information publicity has progressed smoothly.
Fourth, the reform has led to increased employment and has contributed significantly to boosting entrepreneurship. As of the end of 2014, the privately owned sectors employed 250 million people across the country, an increase of 31,176,600 people compared with the end of 2013 — a growth of 14.26 percent. Individual businesses, privately owned enterprises and the service sectors have become the major avenues attracting new employees.
Fifth, the market economic order has maintained stability and momentum of development. With the business system reform, most investors have acted in a reasoned manner and have been fully aware of their rights, interest and responsibilities regarding subscribed capital contribution. Most enterprises have not resorted to unreasonable expansion in the scale of their registered capital. Before the implementation of the reform, there were concerns about a potential scenario of drastic surging or plummeting of registered capital. There were some cases but not as drastic as predicted. With the National Enterprise Credit Information Publicity System effectively functioning and the perfecting of annual reports and release of information, market order has been maintained.
Sixth, the reform has improved the environment for business operations. It has also advanced the facilitation of the industrial and commercial registration system. The expected time for registration has been remarkably shortened, and utilizing the efficiency of capital has increased significantly. The corporate environment has been strengthened. Foreign enterprises and foreign investors are strengthening their investment in the country.
Problems and difficulties also emerged in the reform and need to be resolved. They could be summarized as the following:
First, the social understanding of registered capital of a company is not high. Prior to the reform, the concept of capital credit was deeply rooted in people’s minds. Registered capital is considered as indispensable in government management such as the issuing of permits and certifications, and also in bidding for business. The somewhat erroneous belief was that the amount of registered capital was an indicator of the capability of a company. But in fact, as long as shareholders pay the full contribution, the company is always liable to the full extent of its assets. There is not necessarily any correlation between the amount of a company’s registered capital and its assets. After the reform, the government will no longer provide endorsement of credit for the payment of a company’s registered capital. But on the whole, the public’s understanding of the concept of registered capital will take time to deepen, and much advocacy needs to be done.
Second, synergic implementation of reform of the registered capital registration system has yet to be further promoted. Reform of the business system is not a task just done by one office like the State Administration for Industry and Commerce, but rather systematic work requiring an overall layout deployed by the State Council. This resolutely follows the reform requirements and legal regulations by implementing the registered subscribed capital registration system at registration windows at all levels throughout the entire system, canceling the minimum amount limit of registered capital, and dispensing with the submission of capital verification reports. However, in the advancement of the reform process, problems gradually emerged, such as supporting systems lagging behind and lack of interfacing and synchronization in the management undertakings of relevant departments. For example, some departments still require paid-up capital and capital verification; some industries have threshold registered capital requirements, designating an amount of registered capital as the basis for an administrative permit; and some departments nominate annual inspections of industrial and commercial enterprises as a prerequisite for relevant administrative work. Therefore, in accordance with the deployment of the State Council, State Administration for Industry and Commerce combed out more than 100 ministry-level regulations and is now coordinating 33 ministries to revise the regulations.
Third, the implementation of “license first, certificate second” reform has yet to be strengthened. The State Council has examined and approved three batches of 152 directory lists, and retained 34 items of prior examination and approval in industrial and commercial registration. Thus far, 113 items have been promulgated according to procedures. The method of pre-examination and approval has effectively morphed into post-examination and approval, as announced by the State Council, and this change has been executed at all industrial and commercial registration windows. The reform of the license first, certificate second process involves many government ministries. The key work in the next step should be that those ministries revise relevant regulations, adjust their examination and approval procedures, implement measures and opinions on strengthening supervision during the process and thereafter, and provide guidance for the implementation in their respective organizations so as to avoid supervision vacuums and to maintain market order.
The key tasks to be taken are as followed.
First, we should improve the convenience of the registration system. The measures will include relaxing registration by establishing pilot regions for the reform of enterprise name registration management and allowing enterprises to decide what name they will use. Also, ensuring they understand that they must shoulder any corresponding liabilities. The registration method of the business scope of the enterprise to allow enterprises to decide what they want to run must be optimized. The process must be simplified for enterprise deregistration procedures by designating pilot regions for individually-owned businesses, businesses yet to commence operations, and businesses without creditor’s rights and liabilities so as to create a convenient and orderly market exit mechanism.
Second, we should promote innovation in the market access management model. The reform of the license first, certificate second process needs to be further promoted; registrations should be undertaken strictly in compliance with the provisions contained in the directory of pre-examination and approval in industrial and commercial registrations announced by the State Council. Those not covered by the directory should not be placed as a pre-examination and approval item. A market access management model must be actively explored in the form of a negative list, the notion of absence of legal prohibition means permission for market entities must be adhered to. Autonomy in the management of market entities must be safeguarded and research into and evaluation of regions piloting the pre-establishment national treatment and negative list management model, such as the Shanghai Free Trade Zone, should be strengthened in a bid to promote the shaping of egalitarian market access for all market entities.
Third, the efficiency of government public services is to be maximized. The whole process of e-business registrations should be accelerated. Based on the e-license, online applications, online acceptances, online examinations and verifications, online issuing of permits and online publicity shall be realized to truly reflect the achievements in terms of convenience of the reform in industrial and commercial registration. The registration reform involving the merging of three certificates into one should be further promoted, the one permit/three numbers registration model needs to be rolled out, and the pilot regions for the one permit/one number registration model should be implemented and broadened.
Fourth, we should strengthen middle-term and post regulation. Better conduct random inspection work, and do a better job in filing of registration information, the inspection of penalty information. Meanwhile strengthen guidance and regulation on enterprises’ annual reporting information and instant information. Promote information sharing among ministries and speed up the construction of joint penalty mechanism, as well as establish measures of inter-departmental penalties and concerted regulation. Strengthen credit restriction and promote credit information to be considered as an important matter by other ministries, so that ‘lose credit in one place and face restrictions in every place’ will be realized.
Fifth, The National Enterprise Credit Information Publicity System will be used as a reference to create the directory of small and micro businesses as soon as possible to enable the collective promulgation of support policies, the advancement of support applications from enterprises, the publication of information about support recipients, and so on; based on that, a mechanism for sharing the information of small and micro businesses should be devised to effectively enhance the awareness, accuracy and transparency of support policies and their implementation, and to facilitate the effective implementation of all these policies.
That is all. Thank you.
Let’s move to the second section and let’s give the floor to Minister Shi.
Thank you all, friends from the media. Good morning. On the morning of the first workday after the Spring Festival on Feb 25, Premier Li Keqiang presided over a State Council Executive Meeting. One important point was to approve, after discussion and review, the policies and measures that reduce taxation and fees for small and micro-enterprises. After CCTV’s Xinwen Lianbo, or News Broadcast, went on air that night, some friends from the media called it the big red envelope that reduces taxes and fees. That is fairly appropriate. Giving out beneficiary policies to reduce taxes and fees for small and micro-enterprises at the first State Council Executive Meeting at the beginning of the new spring has a significant meaning.
In that regard, I will provide you with some background information. The government attaches great importance to the development of enterprises, especially small and micro-ones. Premier Li Keqiang said on many occasions that these enterprises are the new force of development, the main channel for job creation, and an important source of innovation.
As the economy turns into the “new normal”, these enterprises play an irreplaceable role in promoting structural adjustment and optimization and public entrepreneurship and innovation. According to statistics released by the National Bureau of Statistics, they contribute about 70 percent of the new jobs and re-employment each year. So in that aspect, they do play an important role.
According to the latest Executive Meeting of the State Council, these enterprises with an annual taxable income under 200,000 yuan will have their corporate income tax halved. Previously, the threshold was 100,000 yuan. That means, from Jan 1, 2015 to Dec 31, 2017, all small and micro-enterprises with an annual taxable income under 200,000 yuan will be able to enjoy the beneficiary policy which will cut their taxes by fifty percent. It means the corporate income tax rate for small and micro-enterprises will be as low as ten percent. As we know, according to the corporate income taxation law, the statutory income rate for corporations is 25 percent, which applies to most companies. Giving a fifty-percent reduction on taxation to small and micro-enterprises with no more than 200,000 yuan of taxable income means a ten percent income tax rate, which is 15 percent lower than the statutory tax rate and ten percent lower than the regular tax rate for small and micro-enterprises.
It is an unprecedentedly large margin of preference. It means much for small and micro-enterprises in terms of increasing cash flow, enhancing anti-risk ability and reducing the financial costs. Especially amid the economic downward pressure that is starting to show, it not only has practical meaning, but also sends out a signal that the State Council attaches great importance to the structural optimization and the stable and orderly growth of economy.
This is not the first time under the leadership of the State Council for the fiscal and tax departments to adjust the beneficiary policies for small and micro-enterprises in recent years. According to my calculations, this is the fourth time for similar adjustments. The previous three were in 2010, 2011 and 2014. It shows how much importance the State Council attaches to small and micro-enterprises.
Meanwhile, in 2014, we waived value-added tax and business tax for self-employed businessman and small and micro-enterprises with monthly sales under 30,000 yuan. The range was increased from 20,000 yuan to 30,000 yuan, which greatly lowered their tax burden and helped their development.
A series of measures that reduce fees were also implemented at the same time. For instance, according to the latest State Council Executive Meeting, the unemployment insurance rate is lowered from three percent to two percent starting 2015. The support for small and micro-enterprises has reached an unprecedented level, given all the beneficiary policies released so far. According to our calculation, aside from the latest beneficiary policies, in 2014, the efforts to lower taxes and fees have saved more than 100 billion yuan for small and micro-enterprises, including about 60 billion yuan in taxation and 40 billion yuan in fees.
Premier Li Keqiang and Vice-Premier Zhang Gaoli gave instructions on many occasions to the fiscal and tax departments to provide beneficiary policies to promote the fast and innovative development of small and micro-enterprises. Based on their instructions and our analysis on the overall economic development, the fiscal and tax departments raised suggestions on further reducing the taxation and fees for small and micro-enterprises.
In the next move, the fiscal departments will join hands with tax departments to implement the beneficiary measures, so that the measures can be put into practice and help the small and micro enterprises. Meanwhile, we will keep tracking the problems found in the economic development and the development of small and micro-enterprises and come up with new measures accordingly to stay updated. That is all I have to say about the beneficiary policies on taxation approved on the State Council executive meeting. Thank you.
China National Radio:
I have two questions. The first one goes to Vice-Finance Minister Shi Yaobin and Xie Xuezhi, deputy head of the State Administration of Taxation. Would you please elaborate on the implementation of income tax breaks for small and micro-sized companies and any new steps that are planned for these companies after the central government decided to expand tax reduction on Wednesday? The second question goes to Liu Yuting, deputy head of the State Administration for Industry and Commerce. The dispute between the SAIC and China’s e-commerce heavyweight Taobao.com last year received much public attention. How did the SAIC reach the settlement with Taobao? What will the SAIC do in future to supervise the product quality of e-commerce?
Good policies have to be carried out well, otherwise they’re just empty words. Just now Vice-Minister Shi explained that we have carried out four tax reductions for small and micro-sized companies. Last year has seen an upgraded enforcement of those policies. In April last year, the threshold of business taxable income was raised from 60,000 yuan to 100,000 yuan, a change that has brought great pressure to bear on taxation authorities in terms of policy implementation. Measures taken last year to implement the policy covers three aspects. First, it has to be timely. We have, together with the Ministry of Finance, issued related documents so that taxpayers could be informed timely of such favorable policies and grassroots taxation authorities could carry out the policy in an efficient manner. Second, the implementation is all-round. All favorable conditions pledged in the policy have to be faithfully carried out. Tax authorities made tremendous efforts last year to fully implement policies to ensure that all the taxpayers who qualified for tax reduction can benefit. The last one is convenience. As we implement the tax reduction policies for small and micro-sized businesses, we also improved tax collection and services for these companies. That includes changing preconditioned government approvals to taking records afterwards, providing more proactive and tailored services for taxpayers and opening up hotlines. Meanwhile, we have motivated the taxation authorities of all levels to join the work of implementation, instead of only relying on the grassroots agencies. The State Administration of Taxation and its provincial branches strengthened the supervision on the policy implementation.
So far, the public has responded positively to the implementation of tax reduction policies, and tax exempted for small and micro-sized businesses reached 10 billion yuan. Last year we have also raised the threshold for value-added tax to 30,000 yuan, which makes the total tax reduction reach about 60 billion yuan. Another tax reduction policy concerning small and micro-sized businesses is the pilot reform to replace business tax with VAT. These packaged tax cut policies have given small and micro-sized companies all-round benefits. We will faithfully carry out the expansion of tax breaks under five aspects. First, we will issue operational documents to lower the level of tax authorities in a timely manner so that taxpayers can benefit from the policy in their first tax payment period. Second, we will promote the policy through the hotline 12366, on media publications and during the visits of grassroots tax collectors to taxpayers. With these measures, the policy will become more publicized and all the small and micro-sized companies will be familiar with the benefits and procedural requirements of it.
Third, we will modify the application system in a timely manner. At the same time, we will further streamline the filing procedures as required by the administrative system reform. Taxpayers will be able to finish the filing procedures at the same time when they fill in application forms, and no longer need to make extra filing procedures. This will relieve the burden on small and micro enterprises. Fourth, we will revise the taxpaying software. An alert message will pop up to remind taxpayers to enjoy preferential policies and calculate the tax reduction accordingly when they make tax declarations using the software. Fifth, we will further strengthen supervision. We have made clear requirements asking the tax authorities to handle and settle the tax cuts for small and micro-enterprises within three days. At last, we believe that the tax authorities will definitely put the policy about letting more small and micro-companies enjoy tax breaks into place, ensure the companies’ development and stimulate the market’s vitality.
As for your question, the spokesman for the State Administration for Industry & Commerce has already responded twice to related issues.
Next, industrial and commercial departments will further administer by law, improve market supervision, and let the enterprises and industries play a full role in self-regulation, and give a better supervisory role to society and government.
All the parties will therefore work together to maintain the market order of online shopping, and safeguard the legitimate rights and interests of consumers.
Regulating the market by law is one of the government’s obligations, with the aims of creating a fair and safe market for consumers, and facilitating the healthy development of the economy.
As a new industry, the Internet industry has made an impact and brought challenges to China’s current legislation and supervision. Though controversies and disagreements remain in some issues of detail, there are no principal contradictions between the development of Internet companies and the regulatory system. They share the same goal of creating a fair market and promoting economic development.
Among the problems that have been exposed, some were caused by the fact that some laws and regulations are lagging behind the current industrial development, some problems are about how to understand the industry during its development, but more problems are about how to strike a balance between driving innovation and risk prevention.
In this regard, we will first of all improve laws and regulations to meet the demands of economic development. We will actively promote the revision of related laws and regulations to form a legally regulatory network with the participation of government, industry, enterprises and the society.
Second, we will ask regulatory departments to change ideas and means that are not adaptive with the development of the Internet industry. We will deepen reform and let the market fully play its regulating role.
Third, the Internet companies should also strengthen communication with related government departments, actively put forward the problems they have encountered and raise useful suggestions. The authorities, in return, should give more instructions to the companies.
My question goes to Mr Shi. Does the Ministry of Finance have a comprehensive plan that includes different policies to help small-and-micro sized enterprises grow?
It’s a very good question. As I just mentioned, according to the National Bureau of Statistics, there are about 10 million small and-micro sized enterprises in China. These enterprises account for a large proportion of enterprises in the country but they are very vulnerable to risks. If we want to make them into “fresh troops” for economic development, a large pool of jobs and an important source of innovation — roles that Premier Li Keqiang expects them to play — we must help them grow as fast as possible. As a result, we need to undertake various efforts to improve their ability to ward off risks. An important aspect is to reduce the burden of tax and fees imposed on them.
Finance and tax departments of the government have been focusing on the issue and have adopted many measures to lower their tax burden.
First, we have readjusted policies four times and included more and more small and micro-sized enterprises into the list of those who only have half of their annual income taxable.
We lifted the threshold for levying value-added tax and business tax last year, from 20,000 yuan to 30,000 yuan of sales per month. We also implemented policies to make tax-deductible loan loss reserves for banks that are established within certain proportions for loans offered to agricultural businesses, and lifted business tax imposed on the interest banks get from loans they offer to farmers.
These different policies covered direct taxes, such as enterprises’ income tax, and indirect taxes, such as value-added tax and business tax. And these tax-reduction policies cover not only small and micro-sized enterprises but also banks that offer services to them.
Second, in recent years, the Ministry of Finance has done lots of work to reduce fees imposed on small and micro-sized enterprises. First, we lifted 42 categories of fees the government charged them. Second, small and micro-enterprises whose monthly sales are no more than 30,000 yuan no longer have to pay for four kinds of fees the government charges to support infrastructure and other public services. Third, in three years since they got registered with the industrial and commercial authorities, these enterprises that contain no more than 20 members of staff workers don’t have to contribute to the government’s fund supporting employment of disabled people.
A rough calculation shows that in 2014, the government lifted more than 40 billion yuan from the burden on enterprises and individuals by canceling fees it used to charge them.
Third, we set aside money from public finances to support the development of small and micro-enterprises. In 2014, the public finances set aside 11.6 billion yuan to make it easier for these enterprises to get loans, enhance services offered to them and encourage them to innovate.
In 2015, the public finances will still set aside 11.6 billion yuan to support them, even though the growth of fiscal revenue keeps slowing and the pressures for spending are as much as last year.
Besides, we are studying setting up a special fund to support the development of these enterprises, and will continue to design favorable policies to reduce tax and fees imposed on them and improve their ability to ward off risks.
We will continue to tap into public finances to help them become more active and more innovative. The finance and tax departments and other relevant departments under the State Council will study these potential policies actively and come up with more good ways to support the enterprises.
South China Morning Post:
I have two questions for Mr Wu.
The “two sessions” will open next week and the “One Belt and One Road” strategy is a highlight that carries great expectations. There are many infrastructure projects under the “21st Century Maritime Silk Road”. In the past year, how did the government encourage Chinese enterprises to invest more in these projects by streamlining approval procedures? What are the effects and what will you do in the future? For instance, how do you encourage investment in the new Silk Road construction projects in Central Asia or South Asia?
You ask if we have any considerations about approval system reform to encourage domestic investment in Central Asia, Southeast Asia and Hong Kong.
We have considered the issue of encouraging investment from abroad, but not focused on a specific area. Approval restrictions concerning investment abroad has long been a key point of our reform.
Regarding the “One Belt and One Road” related approval questions, we will do more research on this aspect.
Hello Mr Wu. Can the government put a figure on how much money was saved by streamlining administrative procedures?
No. Putting a figure on the exact amount would be difficult.
I have two questions for Mr Wu.
There are some administrative approval items that will be canceled or transferred to lower levels in the reform. This is a major move. In what areas will we see the actual difference?
And, how do you classify and categorize what items will be targeted in the reform?
We focus on items concerning enterprises and citizens, especially items that require many and frequent approvals from the government. Also, items with were the subject of numerous complaints were reformed.
Regarding the second question, we carried out the reform according to a clear process.
First, opinions were proposed and then we examined if these were reasonable. Third, we then held specific meetings with specialists to help advise us.
There are situations where we hold different opinions with the department proposing various ideas. Our biggest concern is reducing risk. For instance, approval is needed to transfer diseased wood from one province to another. Some related ministries proposed that the approval was not necessary. However, we decided to keep the approval procedure after considering all the factors.
Reporter from Japan:
I have one question. I would like to get some numbers to understand the results of tax breaks for business. How many enterprises will enjoy the preferential tax, how much tax will be cut and to what extent it will affect the national finances?
You asked about how many businesses will enjoy the preferential tax and how much money will be cut when extending tax-break policies to more micro and small businesses. Well, this number is changing all the time as the profits the enterprises made are changing. There are a number of micro and small businesses which are newly established, have just changed their business models or are no longer operating. I can say that it is a changing number. According to preliminary research, 2.46 million businesses enjoyed the preferential tax with a total cut of over 10 billion yuan ($1.6 billion) up to Dec 31, 2014. Its share of the fiscal income is rather low. However, I don’t think we should estimate the policies’ effectiveness by its share in the fiscal income. We should look at how much tax was cut for a business before and after the policy and how it affects its profits.
From this perspective, according to our calculations, our support to micro and small businesses which had profits under 0.2 million yuan is unprecedented. It is very strong. Thank you.
That is the end of today’s policy briefing. The briefing will be held again after the two sessions.