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Tax cut back on the table for China’s legislature but impact on growth likely to be modest

Taxpayers are hoping for a bigger win to ease cost of living pressures but a consumer-driven surge in spending is not expected to offset trade war

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Commuters heading to work in Beijing's central business district are among those hoping for a more generous tax cut. Photo: AFP

Chinese lawmakers are debating an amendment to the nation’s tax code this week but analysts say any extra cash for consumers will be unlikely to offset the impact of the trade war with the United States and other economic headwinds.

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The Standing Committee of the National People’s Congress, China’s legislature, will consider a revised version of the tax bill, which failed to pass on its first reading in June.

The initial proposal was rejected when many legislators – supported by a strong online campaign – called for a bigger reduction in the individual tax burden for most Chinese citizens.

While the size of the tax cut is still be determined, it is unlikely to achieve the government’s aim of stimulating consumer spending enough to offset the effects on exports and investment of the financial deleveraging campaign and the escalating trade war with the United States, analysts said.

China set to cut tax rates for middle classes in bid to stimulate consumer spending

Details of the second reading have not yet been disclosed and it is unclear whether the current version has the support it needs, or whether further amendments will be required, delaying final passage for several more months.

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