In an apparent move to boost the mainland stock market, Beijing has exempted the national pension fund from paying corporate taxes. The Ministry of Finance and the State Administration of Taxation yesterday announced that the State Council had endorsed the tax exemption, which takes effect from January 1 this year. Beijing temporarily suspended collection of corporate taxes from the National Social Security Fund (NSSF) last year. The corporate tax rate on the mainland is 25 per cent. Based on its investment gains of 108.4 billion yuan (HK$122.22 billion) last year, the move saved the NSSF 27.1 billion yuan in taxes. But since the mainland market has fallen precipitously this year, it is unclear whether the tax exemption will save money for the pension fund since it is likely to have little or no capital gains. The latest tax incentive came shortly after the pension fund spent 10 billion yuan last month to hunt for bargains in the battered stock market that has fallen 61.27 per cent this year. 'The State Council is willing to do anything to stimulate the economy and the stock market,' said Peter Alexander, a principal at fund industry consultancy Z-Ben Advisors. 'The NSSF has often stepped in as a stabilising force, but it's not necessarily a government-directed entity.' This is the second time this year that Beijing has used tax incentives to boost institutional buying in the stock market. The finance ministry and the tax authority exempted mutual fund houses from paying corporate taxes in March on a temporary basis. The pension fund had 516.2 billion yuan of assets at the end of last year, with an equity investment of 206.9 billion yuan, Z-Ben said. An NSSF spokesman was not available for comment yesterday. The pension fund has been striving to increase its value to cover the rising number of retirees. The central government encouraged the fund to chase high-yield returns amid a shortfall at the pension system. 'The NSSF has overreacted to the government's encouragement,' said a fund manager. 'It wants to buy shares aggressively, taking it for granted that the market has hit the bottom.' Pessimistic brokerages forecast that the A-share market will drop a further 20 per cent because of poor company earnings. Sources said NSSF chairman Dai Xianglong, a former central bank governor who took charge of the pension fund this year, had a bullish equity market outlook and believed it was time to heavily increase A-share holdings now. Mr Dai last month said the fund should seek stable, long-term returns as the market turmoil created good opportunities to buy cheap. Beijing hopes the pension fund will set a bullish tone for the moribund market, attracting more funds into stocks. Mainland investors view the NSSF as an in-the-know government powerhouse whose investment strategies reflect the thinking of top officials.