China should slash business tax rates if it wants to compete with the United States, study says
- Report sponsored by industry ministry recommends cutting corporate income tax rate to 20 per cent to bring it in line with US
- VAT should also be reduced by a further three points following similar cut in April
China should cut business tax rates to help its manufacturers better compete with foreign firms and offset the impact of the trade war, according to a government-sponsored study.
Released on Sunday at the 2019 Sanya Forum in Hainan province, the report by the SEEC Research Institute in Beijing said the government should seek to gradually reduce the corporate income tax rate to 20 per cent from the current 25 per cent, and cut value added tax rate by a further three points to 10 per cent.
The study, commissioned by the Ministry of Industry and Information Technology, supports long-standing calls for a reduction of the corporate tax burden to make it easier for Chinese manufacturers to compete with their competitors in the West, particularly the United States, which cut its corporate tax rate to 21 per cent last year.
Analysts expect government spending to increase in 2020 as the government seeks to stabilise the economy, which could reduce the chances of a tax reduction.
Tax cuts made by Beijing earlier in the year – including the VAT reduction – slashed about 2 trillion yuan (US$284.65 billion) from central and local government coffers, making it more difficult for them to fund the infrastructure spending needed to shore up slowing growth.
The American corporate income tax rate is lower than China’s and [the US] has many measures to support industrial research and development
