The manufacturing tax rate dropped from 16% to 13% in 2019
Mar 08, 2019 ｜ by CT
At the two National Sessions held on 5 March, Premier Li Keqiang, in his report on the work of the government, said that in 2019, a larger tax cut would be implemented, with both inclusive and structural tax cuts, focusing on reducing the tax burden on manufacturing and small and micro enterprises. In terms of tax reduction and fee reduction, we will further deepen the reform of added-value tax, reduce the current 16% tax rate of manufacturing industry to 13%, the current 10% tax rate of transportation industry and construction industry to 9%, ensure that the tax burden of major industries is significantly reduced, and maintain the tax rate of 6% first class unchanged. However, we will take supporting measures such as increasing tax credits for production and life service industries to ensure that all industries tax revenue is maintained. We will continue to push forward the three-tier and two-tier tax rates, and implement the inclusive tax reduction policy for small and micro enterprises promulgated at the beginning of this year.
In fact, as early as March 2018, the executive meeting of the State Council had clearly reduced the VAT tax rate of manufacturing and other industries from 17% to 16%, and the VAT tax rate of transportation and construction industries from 11% to 10%. This time, the readjustment of VAT has also made clear the determination and strength of the government to lighten the burden of enterprises and stimulate market vitality.
In response, the People's Daily commented that the big tax cuts are a substantial concession to the real economy, which will enable more enterprises to light up. In 2018, the VAT tax rate was lowered by one point, and 179.4 billion yuan was cut in 10 months, and this tax reduction dividend will doubly increase.
According to the report on the work of the government, tax reduction plus social security burden reduction can "reduce the burden of corporate tax and social security payment by nearly 2 trillion yuan throughout the year". It has exceeded the expectations of many people, especially for manufacturing industries, which is a long-awaited timely rain.
The most direct effect of tax reduction is to increase the profit margin of enterprises. The most intensive tax reduction in manufacturing industry is highly competitive industries, profit margins are already thin. In recent years, the biggest problem for many enterprises is: high costs, where is profit? Even Lei Jun, deputy to the National People's Congress, once bluntly said, "The comprehensive net profit margin of MI hardware does not exceed 5%. Among the various costs, tax burden cost is one of them besides financing cost, employing cost, land use cost and logistics cost.
Therefore, cost reduction constitutes one of the core connotations of "capacity reduction, de-stocking, deleveraging, cost reduction, improving underdeveloped areas”. Since last year, how to reduce costs through substantial tax cuts for enterprises has been a major concern of the whole country. From last year's reduction of VAT tax rate by one point to the determination of new incentive tax reduction measures for small and micro enterprises at the beginning of this year, to today's release of major tax reduction measures which combine inclusive tax reduction and structural tax reduction, the frequent occurrence of tax reduction shows that the government's reform commitment is being steadily fulfilled, and the focus of reform is on resolving the practical problems of enterprises.
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