Economic Daily: Tax Reform Boosts Economic Growth

　　The revenue legal principle was included in the legislation law, the reform of resource tax on coal was implemented, the tax preference for micro and small businesses increased, and the taxation service was upgraded. These were part of the many measures introduced in 2015 in the tax reform. While improving the tax system, the tax reform provided a strong support for the economic transformation and upgrading through relevant measures.

　　New progress achieved in the resource and consumption tax reform

　　As the VAT pilot program is pressed ahead with and the non-tax revenue is streamlined and standardized, the contradictions between financial revenue and expenditure of the local governments have increased in recent years, making the building of the local tax system a key part of the fiscal and tax reform. In 2015, resource tax reform was pushed forward in a good order, which is critical for defining the local tax system.

　　The reform of resource tax on coal was implemented at the beginning of 2015. This reform had two highlights. First, the resource tax would be no longer calculated based on the production volume, but on an ad valorem basis. Inner Mongolia and Shanxi, the two major coal producing provinces, would collect resource tax on coal at a rate of 9% and 8% respectively, and 11 provinces including Henan and Anhui, the minimum rate of 2%. Second, stress would be put on tax collection while clearing expenses, so as not to increase the burden on coal companies.

　　Data show that 25 coal producing provinces contributed RMB 18.16 billion to China's resource tax revenue on coal in the first half of 2015. Calculated by the charging items and standards for the same period of the previous year, coal-related loaded funds dropped by RMB 17.78 billion and RMB 5.18 billion in resource tax on coal was cut.

　　On that basis, the reform of expense clearing and tax collection on an ad valorem basis in respect of resource taxes on rare earth, tungsten and molybdenum kicked off on May 1, 2015, and meanwhile, resource tax on iron ores will be collected at 40%, not 80% of tax payable. Resource tax will play a more positive role in adjusting differential income, saving resources and protecting the environment and crude non-metal ores and water resources will be included in the collection scope.

　　Another priority of the 2015 tax system reform was to use the leverage, consumption tax, to adjust production and consumption and optimize the allocation of resources at the critical stage of economic transformation and upgrading. In May 2015, China adjusted the tobacco excise tax for the first time in the past 6 years, with the tax rate for the wholesaling link rising from 5% to 11% and the unit tax being RMB 0.005 per cigarette.

　　In addition, it is stipulated that consumption tax will not be levied on lead-acid batteries before December 31, 2015, but will be from January 1, 2016, at a rate of 4%. "The reason we do so is to save energy and protect the environment and raise consumers' awareness of energy saving," said Wang Chaocai, deputy director of the Research Institute for Fiscal Science under the Ministry of Finance.

　　Tax preferences work to stimulate vitality

　　Reportedly, tax authorities implemented preferential tax policies in an all-round way in 2015, achieving tax cuts and exemption of more than RMB 300 billion in support of mass entrepreneurship and mass innovation.

　　On the one hand, continuing with deeper tax cuts and exemptions. Micro and small businesses are the foundations of China's economy as well as major channels for entrepreneurship and employment. Since the commercial registration system reform kicked off one year ago, more than 90% of newly registered companies are micro and small businesses, 88.3% of which have a workforce of less than 20. To better support the development of micro and small businesses, the scope of half-payment corporate income tax policy was expanded for two times in 2015, with the annual taxable income of those eligible for half-payment preference rising to RMB 300,000, which cover all the small low-profit enterprises. "Throughout 2015, the threshold policy for micro and small businesses and the self-employed as well as the half-payment corporate income tax policy for small low-profit enterprises contributed to tax cuts and exemptions of nearly RMB 100 billion," said an official from the SAT.

　　On the other hand, giving special support to technical innovations to enable innovations to play a leading role in economic and social development. The Chinese government has introduced a series of tax preference policies in recent years to pertinently support and encourage technical innovations in all aspects and links. For example, the government implements a preferential policy to collect corporate income tax from high-tech companies with special support from the government at a rate of 15%. It is learned that a cut in corporate income tax of more than RMB 100 billion was achieved from 31,000 high-tech companies, and more than RMB 30 billion, from software and IC companies in 2015, which added up to more than RMB 130 billion.
　　In encouraging companies to increase input in R&D and step up efforts in translation of sci-tech achievements, the government loosens the conditions for accelerated depreciation of R&D equipment and provides more preferential policies on accelerated depreciation of fixed assets bought in 10 industries including biomedicine manufacturing, and also implements the tax cut and exemption policies for the translation of sci-tech achievements. In 2015, the fixed assets accelerated depreciation policy contributed to tax cuts of more than RMB 10 billion and a VAT cut of RMB 7.2 billion was achieved from the translation of sci-tech achievements.

　　Taxation service capability further enhanced

　　Taxation services became much more standardized and convenient in 2015.

　　First, this was attributed to the amendment of the legislation law. The third session of China's 12th National People's Congress in March 2015 voted the decision to amend the legislation law through and further mandated the revenue legal principle. According to Liu Jianwen, a professor of Law at Peking University, this is a milestone in building democracy and rule of law in China and crucial to pressing ahead with law-based governance of the country and law-based tax administration. Next, open solicitation for the environmental protection tax law and tax administration law will be conducted, followed by the legislation procedures.

　　Second, the capabilities and levels of taxation services were enhanced. The upgraded version of the VAT invoice system was rolled out nationwide on January 1, 2015, allowing taxpayers to upload real-time the tax digital certificate-authenticated and encrypted invoice data to tax authorities through the internet to generate an original electronic account for the VAT invoice.

　　What does this mean to taxpayers? "The new system allows us to experience remote tax processing." This will save more taxpayers from visiting physical taxpayer service halls, said Chai Liyan, an accountant at Zhejiang Jiangnan Building Co., Ltd. Of the four matters in tax processing, namely, applying for invoices and invoicing, declaring, copying tax and filing tax returns, and authentication, applying for invoices and tax return filing can be conducted online, and remote handling of invoicing, tax copying and tax return filing are made possible after the introduction of the upgraded version of the VAT invoice system, which creates conditions for canceling authentication in the future.

　　As planned by the government, the priorities of the new round of fiscal and tax system reform will be completed in 2016 and the modern fiscal system will be built by 2020. This schedule includes the reform of the major types of taxes. For example, the VAT pilot program will be carried out in the construction, real estate, financial and life service industries, and consumption tax will be expanded in terms of adjustment of the scope of tax collection on some categories, collection links and tax rate. In 2016, the first year of the 13th Five-Year Plan period, the tax system reform will be accelerated, so tax authorities should introduce targeted measures to support economic development while refining the tax system.