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Implementation of Tax Reforms and Subsidies in a Slowing Economy
The Chinese government has been swift to implement tax reforms and subsidies to avert the slowing economy hit by declining exports. In January, China’s manufacturing rate declined for a third month as exports fell and companies cut inventory.
Further tax rebates for the export industry now include 533 hi-tech and machinery products. Companies exporting industrial robots and airplane navigation systems were given a 17 percent tax rebate from the previous rates of 14 and 13 percent. The tax rebates for motorcycle and sewing machine exports have also been upped to 14 percent from 11 and 13 percent.
Subsidies for farmers increased to allow them to purchase household appliances from the previous amount of RMB8 billion to RMB15 billion for 2009. Moreover, the State Council has approved tax breaks and subsidies to encourage the growth of China’s service outsourcing industry. The global service and software outsourcing business is forecast to reach US$1.6 trillion by 2010.
These measures will include tax and fiscal policies and intellectual property rights protection. Businesses dealing with information technology, training, production materials procurement, logistics, and advertising will be qualified as service outsource providers. The government is also offering service outsourcing companies a subsidy of up to RMB4,500 annually per college graduate employed for at least one year.
This is just one of the government’s many concerted efforts to keep China’s economy growing no lower than 8 percent and provide employment for migrant workers and graduating students. Any figure lower than 8 percent and the prospect of civil unrest will threaten stability.
For advice on tax breaks and incentives in China please email tax@dezshira.com.
