Full transcript of policy briefing of the State Council on Feb 27, 2015

Hu Kaihong:

Let’s move to the second section and let’s give the floor to Minister Shi.

Shi Yaobin:

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.