• Beijing has rolled out tax relief and other beneficial policies such as more favourable loan rates and rent exemptions, rather than cash handouts
• Some Omicron-hit regions such as Shanghai and Tianjin are also implementing local support measures, but analysts still expect a big hit to consumption
Beijing says it has stepped up relief measures for coronavirus-hit businesses, as the highly contagious Omicron variant has spread to 28 of the country’s 31 provincial jurisdictions and authorities stick to their zero-Covid strategy that involves large-scale lockdowns and mass testing.
In addition to a planned 2.5 trillion yuan (US$393 billion) tax cut, authorities have also rolled out a variety of supportive measures, including rent exemption and credit support.
Relief packages announced so far
Premier Li Keqiang announced the 2.5 trillion yuan tax-cut package at the “two sessions” in early March, and it is considerably larger than last year’s 1.1 trillion yuan.
Value-added tax (VAT) will continue to be exempted for small taxpayers – those with monthly sales revenue of below 150,000 yuan
Income tax will be halved if annual payment is between 1 million and 3 million yuan
1.5 trillion yuan worth of VAT refunds planned for this year
Local governments will be encouraged to provide preferential power tariffs
Internet platform companies will be encouraged to reduce charges on small businesses that rely on the platforms
Various charges and other administrative fees will also be cut, and that could include money paid to government-backed trade associations, or port-management fees
The State-owned Asset Supervision and Administration Commission also said in March that small businesses and self-employed businesses who rent offices from central-government-owned enterprises will be exempt from rental payments for three months, while those in regions that are at greater risk to the coronavirus will be exempt for six months.
Some pandemic-hit regions have also released their respective supportive measures.
Shanghai, a financial hub with 25 million people, last month offered 140 billion yuan worth of tax incentives and low-interest bridging loans to help businesses survive the city’s phased lockdown to contain the Omicron variant of the coronavirus.
Tianjin, a port city about 100km east of Beijing, announced that VAT will be exempt for public transport firms this year; property tax will be exempt for farm produce wholesalers; and its small and medium-sized manufacturers will be allowed to postpone their tax payments from the fourth quarter of 2021 and first quarter of this year. And Tianjin has pledged to fast-track loan approvals for small and self-employed businesses.
Who is eligible for the tax cuts?
A vast majority of the planned measures target small and micro-sized businesses, as well as self-employed people, showing how Beijing is putting emphasis on employment and social stability in the lead-up to a leadership reshuffle later this year.
At an executive meeting of the State Council in March, China’s cabinet indicated that about 1 trillion yuan worth of tax cuts would apply to small and micro-sized firms.
As they are most vulnerable to the impact of lockdown, the cabinet has ordered the VAT refund for small and micro enterprises to be completed before the end of June, and has pushed forward rent exemptions for state-owned properties.
Sectors dealing with manufacturing; research and technology services; ecological protection; power and gas; and transport will also receive VAT refunds, regardless of their ownership. However, this will mainly take place in the July-December period.