Li: Tax and refunds best way to help economy

Tax, fee cuts and tax refunds are the most direct, fair and effective measures to help businesses and to steady the overall economy, and the government will scale up such efforts if they deliver positive outcomes, Premier Li Keqiang said on Friday.

Meeting the press on Friday morning, in response to considerations about the larger amount of tax cuts and refunds this year, Li said that practices in recent years have shown that tax and fee reductions have worked as the best policy for sustaining market players and for the overall economy.

The Government Work Report for this year, which was approved by a vote on Friday morning before Li met the press, said that the government will further improve the system for refunding value-added tax (VAT) credits. VAT credit refunds will reach a big scale this year, and outstanding VAT credits will be refunded in one lump sum by the end of June.

He said the priority of VAT credit refunds this year will be given to small and micro businesses, as they cover a wide range of sectors, grow in large amounts, and support a massive amount of job opportunities. Yet currently, many of them are financially strapped and face challenges.

The intensified tax cuts and refund moves are made to sustain businesses and increase future tax revenue, Li said.

"Like building a deeper pool to farm more fish, our tax and fee cut and refund measures have helped to nurture business growth and create more sources of tax revenue," he said.

In response to the financial difficulties possibly facing local governments due to recent years of increased tax and fee cuts, Li said the central government is aware of such challenges. This year, the central government's transfer payments to local governments is likely to increase by 18 percent compared with last year to 9.8 trillion yuan ($1.55 trillion), as he described as a "rare amount" in recent years.

Li said most tax refunds will be funded by the central government and a certain amount will also be shared by local governments.