China's Anhui Province, She told Anhui Daily that thanks to a new government policy, her company no longer has to pay value-added tax (VAT), which amounts to a saving of nearly 40,000 yuan ($5,958) a year - equivalent to a worker's annual salary.

Indeed, the Central Government of China is committed to implementing a new policy nationwide for tax reductions for small and micro enterprises. As a result, small taxpayers whose monthly sales are less than 100,000 yuan ($14,912) are exempt from VAT.

At the same time, this policy lowered the standards for small-size and micro-profit businesses, which can now benefit from exemption of business income tax.

According to projected figures, during the three years when this policy will be applied as of January 1, it is estimated that the annual tax reduction will be about 200 billion yuan ($29.8 billion).

During the Second Session of the 13th National People's Congress, which opened on March 5 in Beijing, Chinese Premier Li Keqiang indicated that it will be necessary to implement tax cuts on a larger scale in 2019. He pointed out that tax breaks reached nearly 1.3 trillion yuan ($194 billion) for businesses and employees in 2018.

According to the Report on the Work of the Government delivered by Li, tax reduction is a key measure toward reducing corporate burdens and revitalizing the market, a major reform to improve taxation and optimize income distribution and a crucial decision to support, through macroeconomic policies, the maintenance of steady growth, employment security and economic restructuring.

Sustainable support

Experts believe that preferential policies for small and micro enterprises in China, such as the tax-relief policy, reflect China's willingness to support their development. "Under the pressure of the economic slowdown, small and micro enterprises are encountering more challenges to survive and grow, and are therefore more sensitive to the tax burden," said Li Xuhong, a researcher at Beijing National Accounting Institute.

Actually, more than 30 provinces and cities have initiated relief measures of reducing taxes in six categories and two additional fees by up to 50 percent. This involves resource, maintenance and construction companies, as well as local education.

From both national and local perspectives, all government relief measures are beneficial to small and micro enterprises. In addition, according to the State Taxation Administration, taxpayers do not need an approval process, verification procedure or proof of the claim when they submit their application for exemption.

"Just fill out an online declaration form," said Xiong Wei, a tax collector from Chizhou in Anhui, who assists business accountants with their tax returns.

A welcome relief

Starting last year, the Chinese Government has been issuing numerous policies to reduce taxes and fees for enterprises, aiming at encouraging development, benefiting citizens and stabilizing growth.

In this context, Wu Dongmin, owner of a medical equipment company based in Shanghai, said he is satisfied. Last May, the government adjusted the criteria for small taxpayers, clarifying that the companies with annual VAT-taxable turnover less than 5 million yuan ($745,000) should be classified as small taxpayers. In July last year, his business was so classified, thus reducing his VAT from 10 percent to 3 percent.

"This year, the VAT exemption criteria for small taxpayers have been further eased. We no longer need to pay the tax," he explained to news website Jiemian.com, adding that good policies have followed one after another. As financial pressure on his company has been reduced, it allows him to put more funds on the company's further development. The tax exemption has contributed greatly to the development of companies in multiple fields. "We have more capital to improve product processing techniques," said She. They can also purchase production equipment and increase employees' salaries.

These tax cuts are also important for development and innovation. "For a growing company, there is a need to increase investment in research and development, and increase production lines. Declining tax burdens make small and micro enterprises more competitive in the market," said Wu Xiangsheng, CFO of a copper company in Anhui Province.

From the point of view of the government, there are more considerations. In his government work report, Premier Li observed that for China, a large developing country with nearly 1.4 billion people, reducing unemployment is essential.

Statistics show that tax cuts for small and micro enterprises benefited 17.98 million companies, accounting for more than 95 percent of the total number of companies contributing to tax in the country, 98 percent of which were privately owned.

"Private companies, including small and micro enterprises, are the main source of employment. They play an important role in the promotion of employment as well as its maintenance and stability, "said Zhang Yizhen, Vice Minister of Human Resources and Social Security, at a press conference in December 2018.

"This year, we plan to reduce corporate taxes and social security contributions by about 2 trillion yuan ($298 billion)," said Premier Li.

The complex realities of China, however, must be taken into account in implementing these policies. In this regard, Shi Lei, Member of the National Committee of the Chinese People's Political Consultative Conference (CPPCC), while attending the Second Session of the 13th CPPCC National Committee in March, told ChinAfrica that all local governments and competent authorities should be called upon to put in place and improve the monitoring and evaluation mechanism for reducing taxes.

(Xu Bei and Ma Xiaowen also contributed to the article)

(Comments to glj@chinafrica.cn)