Give small firms a fair deal

Tax cuts for small businesses are a good start to easing their financial burden, but far from sufficient to make running such ventures an easy option for many potential businesspeople, according to an article in 21st Century Business Herald. Excerpts:

The Ministry of Finance said last week that value added tax for small businesses would be cut from 6 percent and 4 percent to a uniform rate of 3 percent.

This policy can help to reduce the burden for small business owners in industrial enterprises with annual sales of less than 500,000 yuan ($82,000) and in commercial enterprises with sales of less than 800,000 yuan a year.

Behind the steady growth of the Chinese economy there is serious overcapacity in many industries and rapidly rising labor costs.

Large enterprises relocate to central and western inland areas in search of cheaper land and lower labor costs, but most small business owners cannot afford to do so. These rising labor costs will eat into their profits, especially in smaller cities.

Small businesses do not contribute much to local taxes and cannot enjoy the preferential policies that bigger enterprises do. A range of fees and fines are collected from them, and the smaller the business, the heavier its burden.

Declining land revenue for governments in small cities increases the concern that local governments will try to squeeze more money from small businesses through various means.

It is now easier to register and start small businesses, but local government interference and red tape have increased the costs of running such ventures.

High costs and a difficult business environment are just two factors hampering the healthy development of small businesses in China.

Laws should be introduced to limit local government intervention in the market and to protect the legal interests of small business owners.