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Lin Shuanglin: Lowering Corporate Income Tax Desirable and Viable

Sep 01-2021   



In a recent seminar of China Macroeconomy Forum, Prof. Lin Shuanglin of the NSD argues for reductions in corporate income tax and customs tariffs to spur high-quality economic growth. He’s also the Honorary Director of Peking University China Center for Public Finance.

 

Over the last few years, China has been working on taxation by raising the bar of taxable personal income and lowering the tax rate of VAT, yet the impact on economic growth seems inconspicuous. It’s likely due to the fact that the corporate income tax hasn’t been reduced, says Prof. Lin. Sporadic tax reductions have been applied to some companies but not universally.

 

China’s investment and economic growth both possess enormous potential for a stronger performance, in light of various positive factors such as high savings rate, abundant capital, and improving technology, among others.

 

To make it happen, China should lower its corporate income tax, which accounts for 23.6% of China’s total tax revenue in 2019, a ratio far higher than major developed countries such as France, Germany and the US, for which the figure was 4.6%, 5.6% and 4.4% respectively in 2018. Prof. Lin also draws attention to the fact that the developed countries have been further slashing corporate income tax.

 

China should make rules to allow its companies to deduct more costs from their taxable revenue, in line with the practice of many countries. Compared with reductions in VAT and other taxes, lowering the corporate income tax will be more positively significant for companies.

 

Prof. Lin also advocates reduction of customs tariffs, which only accounted for 1.83% of GDP in 2019. China should aim to sign zero-tariff pacts with more countries to facilitate free trade, promote economic growth and improve international relations.

 

As China achieves a higher economic growth rate, it can expect to have more tax revenue, lower deficit rate, and lower debt rate, thereby realizing fiscal sustainability, says Prof. Lin.

Lin Shuanglin: Lowering Corporate Income Tax Desirable and Viable

Sep 01-2021   



In a recent seminar of China Macroeconomy Forum, Prof. Lin Shuanglin of the NSD argues for reductions in corporate income tax and customs tariffs to spur high-quality economic growth. He’s also the Honorary Director of Peking University China Center for Public Finance.

 

Over the last few years, China has been working on taxation by raising the bar of taxable personal income and lowering the tax rate of VAT, yet the impact on economic growth seems inconspicuous. It’s likely due to the fact that the corporate income tax hasn’t been reduced, says Prof. Lin. Sporadic tax reductions have been applied to some companies but not universally.

 

China’s investment and economic growth both possess enormous potential for a stronger performance, in light of various positive factors such as high savings rate, abundant capital, and improving technology, among others.

 

To make it happen, China should lower its corporate income tax, which accounts for 23.6% of China’s total tax revenue in 2019, a ratio far higher than major developed countries such as France, Germany and the US, for which the figure was 4.6%, 5.6% and 4.4% respectively in 2018. Prof. Lin also draws attention to the fact that the developed countries have been further slashing corporate income tax.

 

China should make rules to allow its companies to deduct more costs from their taxable revenue, in line with the practice of many countries. Compared with reductions in VAT and other taxes, lowering the corporate income tax will be more positively significant for companies.

 

Prof. Lin also advocates reduction of customs tariffs, which only accounted for 1.83% of GDP in 2019. China should aim to sign zero-tariff pacts with more countries to facilitate free trade, promote economic growth and improve international relations.

 

As China achieves a higher economic growth rate, it can expect to have more tax revenue, lower deficit rate, and lower debt rate, thereby realizing fiscal sustainability, says Prof. Lin.