China’ value-added tax reforms will boost the economy as well as accelerates structural adjustments, Shi Yaobin, a Vice Finance Minister said on Tuesday, citing worries such reforms might fuel property assumption.
The country proposed to replace a business tax with a value-added tax in its construction, including real estate, financial and consumer services sectors, that will take effect on May 1. Meanwhile, the government wished-for trimming taxes by over 500 billion yuan this year.
"This will help stabilize economic growth...and also help improve economic structures," Shi said.
Subsequently, the VAT reform was unleashed in 2012 as a trial program and has been used in railway transportation, including postal services, telecommunications and a few service sectors.
Over 600 billion yuan was trimmed in companies’ tax burdens, Shi mentioned.
However, implementing VAT reforms in sectors like construction, real estate, financial and consumer services would put more complexities, the ministry said.
Shi defended raising concerns, as VAT reforms will enable companies to take account of real estate in the scope of tax deductions, and will suggest to a property buying spree, he said.
It was reported that Premier Li Keqiang mentioned that local protectionism and improper means to compete for tax revenue should be prevented by the country amid the process of reform.
Conversely, the government would as well avert companies from taking advantage of the tax reform to apply production capacity considered outdated and excessive, Li added.
Li said, dividing the value-added tax revenue would be a “reasonable solution” among the central and local governments.
Top talents have pledged to lower taxes and expand the budget deficit of government in 2016 in order to aim for the economic growth, which appears to move sluggishly last year for over 25 years.
Investments in U.S. Economy
Direct investment of China in the U.S. economy is expected to post a new high this year as numbers of deals were announced earlier in 2016. However, analysts say that the pace is moving slowly led by raising scrutiny in the country from politicians and regulators.
Companies in China are anticipated to invest between $20 billion to $30 billion in the U.S. this year, mainly under mergers and acquisitions, compared to last year’s record of $15 billion and $11.9 billion in the last two years, based on reports.
Furthermore, the investment has begun catching attention, as well as regulators and politicians at Washington in the campaign season for 2016. Numbers of voters are in doubt of the U.S. economic and trade ties as moves of China, Mexico and Japan were criticized by Donald Trump.
Despite its mounting to the world’s second largest economy, the country has invested only little in the U.S. compared with countries like U.K., Japan and other advanced economies. However, the annual’s growth moves robust, and China is investing less into commodity-rich developing counties as Beijing tries to recover through technology, services and increasing consumer spending.
An economist at the Rhodium Group Thilo Hanemann said, “They’re scrambling to upgrade their technology, they’re scrambling to build household brands quickly,”
“We’re seeing a big shift in Chinese investment from the developing world and emerging markets to high-income markets including the U.S., Europe and Australia,” he added.
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