Helping small businesses

THE NATIONAL DEVELOPMENT AND REFORM Commission and the Ministry of Finance jointly issued a notice on Nov 17 that small enterprises will be exempted 13 administrative charges from Jan 1, 2012 to Dec 31, 2014.

The central authority has continuously reduced the tax burden on small enterprises since 2008. More than 100 administrative charges were called off in 2008, 31 early this year and 13 now, though temporarily. But there are still about 130 kinds of charges left now for enterprises, according to the administrative charge catalogue issued by the Ministry of Finance this year.

The administrative charges are priced and collected by the authorities to cover the administration costs. However, this system dates back to the planned economy era when government's fiscal revenue was much lower than that today.

The government's fiscal revenue rose 21.3 percent last year, reaching more than 8.3 trillion yuan ($1.3 trillion), 21 percent of GDP, which grew 10.3 percent year-on-year. Hence the government has the means to reduce the taxes and fees for the country's smaller enterprises, which make a substantial contribution to economic growth and job creation in China.

The global financial crisis and the tightening fiscal policy highlight the necessity and timeliness of the authority's notice targeted specifically at helping small enterprises to relieve their financial burdens amid shrinking oversea markets and rising labor costs.

Their difficulty in securing financing is palpable in the current bank credit system. According to the Development Research Center of the State Council, all large-scaled enterprises and more than 80 percent of medium-sized enterprises are covered by bank credit. In contrast more than 80 percent of small enterprises could not get any bank credit at all in 2010.

Even if small enterprises do obtain loans, they have to sustain loan guarantees, collateral charges, valuation fees, brokerage fees and interest rates that are twice as high those for large firms.

Administrations should be conscious of the development potential of China's small businesses. The revenue from administrative charges cannot equate with the possible benefits successful small enterprises may bring if they are able to flourish in a favorable business and market environment.

Thus, exemption of administrative charges for small enterprises should be implemented as a permanent reform, instead of a makeshift strategy to respond to the global financial crisis.