CHINA has achieved the largest tax cut so far through its value-added tax (VAT) reform, with the total reduction rising by 60 percent in 2017 from a year earlier, according to data released by the State Administration of Taxation.

Last year, a total of 918.6 billion yuan (US$145.93 billion) of tax was cut after the replacement of a business tax by VAT, compared with a cut of 573.6 billion yuan in 2016, said Wang Shiyu, deputy head of the administration’s tax policy and regulation department.

The country’s VAT reform, which is seen as a key part of supply-side structural reform efforts, was first piloted in Shanghai in 2012 and was then expanded nationwide from May 1, 2016. During that period, nearly two trillion yuan of tax has been cut, according to data from the Ministry of Finance.

Meanwhile, the tax reduction policies targeting small businesses with thin margins helped save them 45.4 billion yuan.

Finance Minister Xiao Jie pledged at the annual work conference in December that further implementing tax cut policy is a priority this year, to further ease enterprises’ burden and to give more impetus to economic growth.

Experts have predicted that a further reduction of more than one trillion yuan could be achieved in 2018 through VAT reform, with a possible cut of the VAT tax rate by 1 to 2 percentage points. The highest tier of the current value-added tax rate is 17 percent.

China’s VAT rate structure was further cut from four to three tiers — set at 6 percent, 11 percent and 17 percent — starting from July 2017, which led to tax cut of 14.7 billion yuan from July to December, according to a State Administration of Taxation official.

Despite the tax reduction through VAT reform, the country’s overall tax revenue in 2017 increased to 12.6 trillion yuan, up 8.7 percent year on year.

(SD-Xinhua)