China Scraps Taxes on Small Firms to Boost Economy

China Scraps Taxes on Small Firms to Boost Economy

China will lessen the tax burden on small businesses, the government has announced, as part of a package of measures aimed at boosting the slowing economy.

Small firms with monthly sales of less than 20,000 yuan ($3,260) will be exempt from paying turnover tax and value-added tax (VAT) from August 1, the central government said in a statement released late Wednesday.

VAT is levied on the difference between a commodity’s retail price and its cost.

It was among a series of measures to support the economy unveiled by Chinese Premier Li Keqiang at a cabinet meeting on Wednesday.

The tax exemptions will benefit more than six million small companies, the statement added.

China’s economy expanded 7.5 percent year-on-year in the April-June period, slowing from 7.7 percent in the previous three months, raising worries the world’s second largest economy could be headed for a sharp downturn.

Among other steps, the government will set up a fund for railway development, offer tax rebates and keep the yuan’s exchange rate at a “reasonable” level to boost international trade, it said.

Exporters complain a stronger yuan is hurting their overseas sales by making their products more expensive.

Lu Ting, an economist with Bank of America Merrill Lynch, called the new policies a “small stimulus”.

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