Anchoring small biz and market expectations

Government Work Report 2022 confirms thrust on steadying growth via tax, fee cuts

China's relentless efforts in supporting and facilitating smaller business communities will help keep economic growth on a steady course and accelerate the country's development, experts and market insiders said.

China has set its GDP growth target at around 5.5 percent for this year as the country's national lawmakers and political advisers gathered in Beijing last week to map out development priorities. Delivering the Government Work Report on March 5, Premier Li Keqiang said achieving the GDP goal will require arduous efforts.

Measures to achieve such a goal were also announced, including a greater package of tax and fee cuts to support market players, especially small ones.

During this year's two sessions, the annual sittings of China's national legislature and the top political advisory body that ended on Friday, many political advisers from the field of economics shared their views on the Government Work Report and hailed the government's new efforts to support smaller businesses.

Wang Yiming, a political adviser and also a member of the 13th National Committee of the Chinese People's Political Consultative Conference, said the tax and fee moves can be extremely important this year.

"This will help keep liquidity in the hands of smaller businesses and help them to tide over tough times," he said.

He also said small and medium-sized enterprises and self-employed individuals remain key to the nation's efforts to create jobs and achieve economic prosperity. That is why they are the primary beneficiaries of the new tax cuts and refunds this year.

Economists said they believe that over the past year, smaller businesses, affected by the changing market dynamics and rising commodity prices, particularly in the downstream, experienced considerable pressure.

Shi Yinghua, a professor at the Chinese Academy of Fiscal Sciences, said in an interview prior to the two sessions that smaller businesses are important forces underpinning Chinese growth, as they are large in number, cover wide-ranging sectors, and create immense job opportunities. Over the past year, tax and fee cuts extended to them have played a significant role.

"Over the past year, policies that alleviate burdens on micro, small and medium businesses, particularly in manufacturing, have worked effectively in tackling temporary difficulties. Government work reports at provincial and municipality levels have shown that in 2021, the tax cuts reached a certain (decent) level," Shi said.

Finance Ministry data showed that tax and fee reductions introduced last year totaled about 1.1 trillion yuan ($174 billion). In addition, tax payments were postponed for micro, small and medium enterprises－MSMEs－in manufacturing as well as coal-fired power plants and heating-supply enterprises as a temporary measure.

These moves have proved a direct and effective way of helping enterprises ease their difficulties and have also proved to have helped nurture business growth and cultivate sources of tax revenue. Last year, revenue generated from taxpaying market entities registered since 2013 reached 4.76 trillion yuan.

Shi noted that going forward, such moves will remain crucial, as continued efforts in bringing down tax payments of smaller businesses will greatly help anchor market expectations.

The 2022 Government Work Report confirmed that the government will issue value-added tax credit refunds on a big scale this year. Amid such moves, priority will be given to micro and small enterprises, refunding outstanding VAT credits to them in one lump sum by the end of June while also fully refunding newly added credits.