Tax cuts spur vitality of the economy

At the news conference marking the end of this year's annual session of the National People's Congress, China's top legislature, Premier Li Keqiang mentioned that the tax cuts rolled out by the government have accumulated to more than 8.7 trillion yuan ($1.37 trillion) since 2013. He likened this to "building a deeper pool to farm more fish".

Tax cuts are only one of the options in the government's policy toolbox to help enterprises, with the other two most commonly used being investment and issuing consumption coupons. However, while investment stimulates the economy, it mainly benefits the enterprises and market entities on the investment chain, while consumption coupons only help those enterprises chosen by consumers. Tax cuts help more businesses and have the highest coverage rate. As Premier Li said, "From our practice in the past few years, the effect of tax reduction and fee reduction is the most direct."

It is small-and micro-sized enterprises that benefit most from tax cuts, and they are the most vulnerable when facing difficulties. That's why tax cuts are often called "a long-expected rain", because they can help many small-and microsized enterprises save money and even survive.

The tax cut policies have also been constantly improved over the years to avoid their marginal effect being weakened. The year 2022 will see tax cuts of 2.5 trillion yuan, which far exceeds expectations and will stabilize the macro-economy.

Moreover, the tax cuts will prioritize key industries such as advanced manufacturing, science and technology research services, ecological and environmental protection, electricity and natural gas, as well as transportation. Considering their key roles in boosting innovation, maintaining the completeness of the supply chain as well as defending economic security, these priority recipients have hit the very growth points for the economy.

Some argue that tax cuts might deplete the government's financial resources, but they will help promote social development by boosting economic vitality. Just as Premier Li pointed out, the total tax cuts since 2013 have reached 8.7 trillion yuan, but the national financial income had grown from 11 trillion yuan in 2013 to 20 trillion yuan in 2021, which means good economic performance.

In some sense, that result echoes Premier Li's "building a deeper pool to farm more fish". Tax cuts mean the government helps enterprises and other market entities solve their problems, in which process the government sacrifices some of its interests for the interests of all.

- 21ST CENTURY BUSINESS