China suspended the value-added tax and business tax on small enterprises Aug. 1 in a move to help stabilize economic growth and smooth the way to expand the VAT pilot to other industries by the end of 2015, practitioners told BNA.
The exemption applies to businesses with monthly sales of less than 20,000 yuan ($3,267) and is expected to benefit more than 6 million small companies and tens of millions of jobs, according to state-run news agency Xinhua.
China announced the new policy in a statement released July 24 after an executive meeting of the State Council led by Premier Li Keqiang.
The exemption is part of a three-pronged approach to ensure continued economic growth that also includes measures to stabilize exports and speed up railway investment and financing.
“These measures are much needed to stabilize growth and employment,” wrote Qu Hongbin, co-head of Asian economic research at HSBC, and Sun Junwei, China economist at HSBC, in an Aug. 2 report from HSBC Global Research. Small and medium-sized enterprises (SMEs) “generate 80 percent of employment in China and the policy of temporarily exempting VAT and business tax for small and micro-sized companies … aims at stabilizing employment conditions,” they wrote.