China Briefing | Chinese Premier Li Keqiang’s tax cuts are a good start but must go deeper
Li should be commended for his pledges to ease the burden on workers and business but much more has to be done
Compared to previous years, Premier Li Keqiang’s annual press conference last week was a subdued event. The briefing, televised live after the annual sessions of the National People’s Congress and the Chinese People’s Political Consultative Conference, is the only time the premier speaks to the Chinese and overseas media.
Li tried to look confident but there was no high-minded rhetoric and his attempts to sound witty did not go down well. He was spared the tough questions on the environment and the yuan, and he skipped over last year’s stock market meltdown, which had added to pessimism at home and abroad about the Chinese economy.
But, as he made a robust defence of his economic policies and expressed confidence that the economy was not heading for a hard landing, he still showed that he had his finger on the pulse of economic management.
Cutting taxes and red tape have become key messages this year, moves that should be welcomed by the business community which otherwise had a terrible 2015 and expected this year to be worse.
Li has unveiled a more aggressive deficit spending plan for 2016, raising the deficit to 3 per cent of GDP, an increase of 560 billion yuan (HK$671 billion) over 2015. Much of the money will be used for tax and fee cuts.
READ MORE: Growth target will be met: China’s Premier Li Keqiang as he vows cuts in taxes and red tape
One key component is – from May 1 – to replace the business tax with a value-added tax in four major sectors: construction, real estate development, financial services and consumer services. The plan, which started with a pilot scheme in Shanghai in 2012, is the most important taxation shift since 1994 when the existing tax regime was established.