[Solution] The State Council is preparing for "mass tax cuts": not only need determination, but also art

To talk about the hottest words in the National Day Golden Week, "tax" is well deserved.

On October 3, Fan Bingbing’s “Yin and Yang Contract” tax issue had the final result, which caused the public to pay close attention. What is more affecting is the issue of personal and corporate taxation. On October 7, the Minister of Finance, Liu Kun, made an explicit statement in his interview that “there are still more large-scale tax cuts and more obvious measures to reduce fees”; on October 8, the State Council executive meeting decided to improve the export tax rebate policy. Measures to speed up the progress of tax refunds.

However, it is worth noting that, beyond the attention, everyone's expectations do not seem to be high. In particular, the rapid growth of tax revenues in the first quarter of this year and the first half of the year made the tax reduction amount and the people's expectations have a certain degree of disconnection, and all circles have discounts on the “acceptance” of tax reduction.

As early as the beginning of this year, the "Government Work Report" determined the target of tax reduction and reduction of 1.1 trillion yuan. According to the tax reduction measures already in place, the actual tax reduction may exceed 1.3 trillion. It can be seen that the intensity and determination of the central tax cuts are very obvious.

So, how should tax cuts be made? What link and intensity of tax cuts can be called "mass tax cuts"? How to maximize the stimulating effect of tax cuts on the real economy under the premise of the established tax credits? Today, we still invited the finance and tax experts and Professor Fan Ziying from Shanghai University of Finance and Economics to interpret for us. Although the professionalism of this article is relatively strong, it may not be as easy to read as the general article, but I believe that reading can have a more intuitive understanding of the tax system adjustment considerations and challenges.

Tax reduction rate

Judging from China's current national conditions, corporate tax accounts for 90% of China's total tax revenue. Therefore, tax cuts must also be based on lowering corporate tax burden. Because it can effectively reduce the macro tax burden on the one hand, it can also help to hedge the negative impact of the Sino-US trade war.

At the tax level, the main direction of tax reduction should be VAT and corporate income tax. These two taxes account for 62% of all taxes, and only if they fall, can they be called "mass tax cuts."

How to implement it?

The simplest solution is undoubtedly the tax reduction rate, the easiest to operate, and the most obvious reduction effect. On May 1 this year, the benchmark rate of VAT fell from 17% to 16%, and the tax rate of 11% fell to 10%. Therefore, the new round of "mass tax cuts" will inevitably involve a reduction in the base rate, and of course, the tax rate.

How to understand this tax rate and file?

This has to start from the multiple tax rates in 2012. As we all know, the service tax of the service industry was often a low tax rate of 3% or 5%. If it is to be converted into a VAT tax system, it may bring about a large tax fluctuation. In order to make a better transition, under the original 17% VAT rate, some new tax rates were set up. As a result, there were 11% and 6%, that is, multiple tax rates.

However, multiple tax rates have also brought unfairness in the VAT tax burden between industries. Since China's value-added tax is based on the “tax deduction method”, which is the reduction of sales, assuming that a 1 million commodity flows from the 6% tax rate industry to the 17% tax rate industry, then the 6% tax rate industry only needs to open 60,000 (100). 10,000 * 6%) of the tax receipts, that is, the input tax of the industry of 17% tax rate. However, for the 17% tax rate industry, if the price of the goods is 2 million, his output tax is 340,000 (2 million * 17%) of the output tax, and the final VAT is 280,000 (340,000 - 60,000). .

But the problem is that its actual added value is only 1 million. If it is calculated by this, 17% of the industry will pay only 170,000 yuan, and the upstream will pay less than 110,000 VAT, all of which will be paid by the downstream industry. This creates a lot of irrationality. Therefore, this round of VAT rate has dropped, and the decline in the high tax rate has exceeded the low tax rate to ease the unreasonable distribution of tax burden.

For example, the VAT benchmark rate is reduced from 16% to 14%, the 10% tax rate is reduced to 9%, and the 6% tax rate is unchanged.

Another corporate tax rate that needs to be adjusted is the corporate income tax.

Since the establishment of the 25% benchmark rate in 2007, corporate income tax has not adjusted the tax rate. The tax rate for the year was set at a rate of 28.6% for 159 countries around the world. We set a certain competitiveness at 25%. But the problem is that the situation has been changing for more than a decade. In fact, many countries have lowered the corporate income tax rate. The US has reduced the corporate income tax rate to 21% in 2017. The Chinese income tax rate under the new situation has no advantage.

Therefore, the benchmark tax rate for corporate income tax in China can be lowered to about 22%.

Tax reform

Tax cuts in any era are closely related to policy objectives. Although the tax reduction rate can reduce taxes, it does not necessarily match the current target.

If our aim is to stimulate consumption, then reducing the VAT rate is certainly useful. The value-added tax belongs to the ring deduction, the layer is passed on, and finally the tax is attached to the commodity price. Under ideal circumstances, lowering the VAT rate will lower the price of final consumer goods, thereby stimulating consumer demand and increasing domestic demand.

However, if the purpose is to promote business operations, reducing the corporate income tax rate may not have the expected effect. When the macro economy is not significantly warming up, only those companies with good business conditions will have more pre-tax profits; while those that really need help, the level of profits is very low, and even years of losses, these companies are taxed at 25%. When the tax rate is reduced, their corporate income tax is very small, and the tax reduction effect is small.

Furthermore, if “mass tax cuts” are related to boosting the vitality of the real economy, then we need to expand more on the improvement of the tax system. In other words, in addition to reducing VAT and corporate income tax, we must reform the tax system.

The first is to allow companies to carry forward losses. The operation of the enterprise must be profitable. The income tax is paid in the profit year. If the loss is made, according to the existing tax law of China, the enterprise can carry forward the loss to the next five years. However, companies are not allowed to carry forward, that is, they cannot return the previous years and the corporate income tax paid.

However, many other countries do not. Many countries allow to carry forward losses both forward and backward, only to make some provisions on the carry-over period. In a sense, this is a kind of subsidy for enterprises with difficulties in business, which helps enterprises to tide over the difficulties.

The second is to expand the scope of the tax refund for the tax. The so-called tax exemption means that more goods are purchased in the month, and there is more input tax and more inventory goods. If the current investment is greater than the sales, there will be a tax deduction, and there will be a correspondingly large inventory of goods.

The value-added tax paid by the enterprise is the output tax minus the input tax. When the output tax is less than the input tax, the problem of the tax credit is generated. That is to say, the input tax that the enterprise can not use in the current year is to allow the enterprise to go. Used after the year. This is equivalent to the enterprise providing an interest-free loan to the government, which increases the financing burden of the enterprise when the financing of the real economy is difficult. In 2018, the Ministry of Finance carried out a policy of refunding the tax allowance for modern service industries such as equipment manufacturing and R&D, and the power grid enterprises, and achieved good results, indicating that this policy has a positive effect.

Finally, there are some tax policies that stimulate corporate investment.

In 2014, the relevant departments launched a fixed asset accelerated depreciation policy for some industries. In 2018, the policy was further strengthened, but it was not obvious from the implementation effect. One of the main reasons is that the investment demand of enterprises in the economic downturn is very small. At the same time, the pre-tax profit of many enterprises is not much. The depreciation of fixed assets is only to reduce the pre-tax profit of the year. For some private manufacturing enterprises. This policy is still not used during the economic downturn.

Considering that most companies pay VAT, they can use the income tax deduction policy and draw on the VAT tax system. In order to boost the investment of enterprises, especially private enterprises, it is possible to allow enterprises to deduct the input tax on purchased fixed assets, which is equivalent to giving targeted subsidies to those investing enterprises, stimulating enterprises to increase investment and thus enhance Economic vitality.

Risk prevention

Tax cuts are risky, and in many cases, the risk is still very large. Imagine if the "mass tax cuts" brought about "large-scale reductions" and the real economy did not recover significantly. "Large-scale tax cuts" may make the Chinese economy fall into a more embarrassing situation. Therefore, it is very important to make a risk prevention plan.

The first is the sharp decline in the state's fiscal revenue. "Large-scale tax cuts" require aiming at the most important types of taxes, so the reduction is an inevitable result. If the tax rate is lowered significantly, and new changes in the macroeconomic situation are superimposed, such as the decline in the PPI (production price index), then The effect will be multiplied.

If the reduction is large enough, it will need to cooperate with debt issuance to fill the financial vacancy, which is likely to break the existing 3% deficit rate. Considering that China's actual deficit rate may be higher, it will inevitably increase fiscal debt. risk.

Second, the financial difficulties in some areas have intensified. The effect of tax reductions is generally not very serious at the national level, but once implemented in a specific place, it may be completely different. In the same tax reduction policy, some areas may be affected less, and there will inevitably be some very large impacts.

Therefore, an inevitable problem of "mass tax cuts" is that financial difficulties in some areas will intensify. If local income and expenditure gaps are not alleviated for a long time, it will affect the normal operation of local governments, such as influencing institutions. Salary of personnel in public institutions. Therefore, the central government needs to make a plan for the specific risks of these special areas.

The third risk is the strategic behavior of local governments. “Large-scale tax cuts” refer to certain types of taxes, and the income of these taxes is often shared among different government levels. For example, in current VAT income, central and local governments each account for 50%, and tax reductions at the national level. Policies will directly affect local income, and local government incentives and behaviors will change accordingly. One possibility is to increase the intensity of the collection, or gradually clean up the original tax incentives. These strategic behaviors will be largely hedged. "Large tax cuts."

In the final analysis, tax cuts are not only a tax reduction rate, but also an "art" worth pondering.

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