CHINA will further value-added tax (VAT) reform in2019 to ensure taxes are cut rather than increased, Minister of Finance Liu Kun said at a press conference on the sidelines of the annual legislative session in Beijing on Thursday.

The total taxes and fees to be cut this year may exceed the governmental target of2 trillion yuan (US$298 billion), according to Liu.

The VAT rate will be lowered from16 percent to13 percent for the manufacturing sector, and from10 percent to9 percent for transportation and construction sectors, Liu said.

The country will promote an inclusive tax cut and structural tax cut simultaneously, lowering the tax burden of manufacturing and small and micro firms.

Meanwhile, the government will continue to relieve the burden on businesses and lower contribution rates that enterprises must pay for the basic pension insurance.

The required contribution rates could be cut to16 percent.

Debt risks under control

Risks of China’s local government debts are controllable and measures are being taken to prevent any increase in hidden debts, he said.

The debt balances of both China’s central and local governments are within the legal limit, according to him.

The debt balance of local governments stood at18.39 trillion yuan at the end of last year, well below the official ceiling of21 trillion yuan, official data showed.

The local debt ratio was76.6 percent last year, significantly lower than the international warning line of100 percent to120 percent, while the total government debt ratio, taking into account the debts of the Central Government, came in at37 percent, also far from the alert level of60 percent set by the European Union, Liu said.

A market and law-based mechanism has been established to deal with debt defaults, the minister said, calling the progress in reducing existing debts positive.

R&D spending to rise

The Central Government will spend354.3 billion yuan on R&D and science and technology innovation this year, up13.4 percent year on year, Liu said. The ministry will also increase infrastructure investment by40 billion yuan year on year to577.6 billion yuan this year.

China will increase its fiscal budget for air pollution control to25 billion yuan this year, up25 percent year on year, Liu said.

National budget up  

China’s revenue in the national general public budget is projected to total19.3 trillion yuan this year— up5 percent since last year— while expenditures are projected to amount to23.5 trillion yuan, a6.5-percent increase.

Social security funds

China’s social security funds have been operating well and are able to ensure punctual and full pension payments to retirees, he said.

The central adjustment fund, which came into effect July1,2018, to balance the payment burdens of local governments, is expected to be about600 billion yuan this year, Liu said.

The country will appropriately increase the basic pension of retirees, Liu said. The central budget for basic pension transfer payment is set at739.2 billion yuan, up10.9 percent year-on-year.

For some provinces where there persists a financial gap in pension funds, even after help from the central fiscal subsidy and central adjustment fund, the central and local government will work together to fill the gap, Liu said.

Financial support to SMEs

Providing more financial support to small and medium-sized businesses is of key importance for China’s fiscal policy this year, Vice Minister of Finance Liu Wei said at the same press conference.

Starting from Jan.1 the country has expanded the scope of SMEs to allow more companies to enjoy tax and fee cuts— especially value-added tax. Preferential tax policies for technology and innovation startups have been further extended.

China will take further measures to make it easier for SMEs to access financial support, such as raising the entrepreneurial guaranteed loan limits to150,000 yuan for individuals and3 million yuan for SMEs.

In order to support SME development, the government will reserve30 percent of procurement orders for SMEs, offer price deductions to fuel their competitiveness, and advance payment is under consideration as well, Liu said.

Poverty alleviation fund

China will continue to keep poverty alleviation at the top of its agenda, allocating126.1 billion yuan in special funds, up18.9 percent year on year, said Vice Minister of Finance Cheng Lihua, who added this is the fourth straight year the fund has increased by20 billion yuan.

Cheng said China will further optimize fund allocation in different sectors, focusing on compulsory education, basic medical care and meeting housing and drinking water needs in poverty-stricken areas, while allocating more funds to extremely poor regions.

(SD-Xinhua)