China ramps up efforts to refund VAT credits to enterprises

By Wang Guan, Source: People’s Daily

 

China’s value-added tax (VAT) credit refunds this year have exceeded the total of those in the previous three years, and its VAT credit refunds scheduled for the whole year had been handled before the second quarter ended.

From April 1, when the country started to implement the VAT credit refund policies on a larger scale, to Aug. 15, China refunded VAT credits worth more than 2.01 trillion yuan ($290 billion) to taxpayers, showed statistics released by the State Taxation Administration (STA) on Aug. 26.

As 123.3 billion yuan of VAT credits were refunded under previous policies in the first quarter of this year, taxpayers in China have received tax refunds totaling nearly 2.14 trillion yuan, with micro and small-sized enterprises making up the majority of the recipients.

The VAT credit refund policies, a critical measure for China to deal with downward pressure on its economy and stabilize the macro economy, have been extended to seven more industries in July this year, according to a statement jointly issued by the country’s Ministry of Finance and the STA.

“The VAT credit refunds came right in time and helped us get through the hardest days,” said An Shuangshuang, who works for the financial department of an automobile drive system developer based in southwest China’s Chongqing municipality.

According to her, the company was in a very tight cash flow situation earlier this year as it was developing a new hybrid drive system and there was no deliverable that could go commercial.

“As a small firm, we must scrimp and save, and at the critical moment, we received 180,000 yuan of VAT credit refunds that alleviated our financial difficulties,” An told People’s Daily.

Gong Gang is the head of an intelligent equipment manufacturer in Chongqing. An R&D project of his company was often suspended due to capital shortage.

“We invested huge capital in the early stage and the loans approval was slow,” the man said, adding that the project was very close to completion.

After the VAT credit refund policies were implemented, the company immediately applied for credit refunds of over 530,000 yuan. With the refunds, it purchased two testing devices and more than 10 tonnes of production materials, and restarted the suspended project.

“We’ll work to tackle key problems and we are quite confident about it,” Gong said.

“The continuous implementation of policies, including the VAT credit refund policies that have been implemented on a large scale, have played a positive role in boosting the confidence and vitality of market entities,” said Li Xuhong, a professor at Beijing National Accounting Institute.

VAT invoice data indicated that in June this year, micro and small-sized enterprises in China saw their combined sales revenue increase by 5.8 percent, 3.2 percentage points higher than that in the previous month.

Through the VAT credit refund policies, the country has provided timely assistance and help for enterprises in industries that have been hit hard by the COVID-19 pandemic, such as the tourism and civil aviation industries, and helped them pull through difficulties.

“Since the beginning of this year, our businesses have been closed for several months due to COVID-19 resurgence. During that period, we didn’t have gate receipts and had to bear quite a lot of maintenance and labor costs. It was the 16.32 million yuan of VAT credit refunds we received that enabled us to tide over the difficult time,” said Xu Jing, a senior executive responsible for managing the financial affairs of an agricultural tourism development company based in central China’s Henan province.

The money has helped the company pay for projects and pay salaries of more than 300 employees and interest on loans, according to Xu, who disclosed that the company has developed more agricultural tourism projects before it reopened businesses in April.

The implementation of the VAT credit refund policies bears great significance for stabilizing China’s industrial and supply chains and increasing the country’s economic resilience, as it can help solve the problem of tied up capital caused by purchase of large-scale fixed assets and long product turnover period, and enhance key sectors’ endogenous impetus for high-quality development, according to Jiang Zhen, an associate research fellow at the National Academy of Economic Strategy under the Chinese Academy of Social Sciences.