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Tax reform to help firms tide over crisis

(Xinhua)
Updated: 2008-12-10 07:43

The value-added tax (VAT) reform will help domestic enterprises tide over the effects of the global financial crisis, a senior official said Tuesday.

Exports have suffered because of the financial turmoil, which started in the US, Zheng Jianxin, deputy director general of the Ministry of Finance's taxation department, said. But the government is trying to work out measures to reduce its impact.

"The VAT reform will encourage investment in and technological upgrading of Chinese companies, boost domestic demand, improve competitive strength of companies and play a positive role in helping firms tackle the financial crisis," Zheng said during an online interview with netizens on the government's website, www.gov.cn.

Last month, China said it would extend the VAT reform to all industries from Jan 1 as part of the $586-billion stimulus package to boost domestic demand and cut companies' tax by more than 123 billion yuan next year.

The reform is aimed at shifting from the existing production-based to a consumption-based VAT regime, which would grant tax deductions on spending on fixed assets, Zheng said.

The reform will see the scrapping of policies that exempt imported equipment from VAT and deny foreign-funded firms tax rebates on domestic equipment purchase, putting them on an equal footing with domestic companies, he said.