According to the 2011 Follow-Up Survey Report on 1,000 Private Enterprises, in addition to long-standing problems like rising costs and financing difficulties, private enterprises also found the heavy tax burden a problem this year. Tax aside, charges of all kinds have also become a great load to private enterprises.
Only 0.5% of respondents reckon tax is light
It is learned that the report was released jointly in late October 2011 by the China National Democratic Construction Association and China Entrepreneurs Survey System (CESS). Questionnaires of this year’s survey were sent out in early August. As of 6 September, a total of 1,166 valid questionnaires were returned.
In the survey, over 80% of private enterprises indicated that their tax burden was “very heavy” or “quite heavy”, while 15.6% said it was “so-so” and only 0.5% reckoned it was “quite light”. According to CESS’ analysis, the overall rating for tax burden is only 1.83 in this year’s survey, below the median value of 3 and also considerably lower than that found in a similar survey in 2010.
Heavy tax burden has all along posed a major development obstacle for enterprises. Professor Xu Xiaonian of the China Europe International Business School noted that the combined rates of business tax and VAT alone for Chinese enterprises amount to over 40%, a heavy tax burden not matched in many other countries.
“Besides tax, there are also charges”
In addition, in response to the question on “the amount of charges, funds, sponsorships paid to various levels of governments on top of those prescribed expressed as a proportion of your enterprise’s sales revenue in the past year”, 23.6% of the respondents chose “more than 1%”, higher than 2010. 40% opted for “0.1%-1%” while 27.6% chose “0%-0.1%”. 8.8% indicated that no such amount was expended.
Li Zhongjian, general manager of Tung Fong Lighter Ltd, said, “Tax payment accounts for over 20% of my enterprise’s operating costs. Apart from tax, there are also all kinds of fees and charges.” While state-owned enterprises enjoy subsidies and support measures from the state, private enterprises have to shoulder their own tax burden. “Levying VAT is reasonable as it is paid when an enterprise makes a profit. Business tax, however, is a heavy burden. It is levied irrespective of whether an enterprise is producing any goods or making a profit. I urge the government to slash the business tax rate,” Li said. He also noted that there are many cases of double taxation during the course of production.
Tax rate should be lowered and unreasonable charges abolished
Zhou Dewen, president of the Wenzhou Small- and Medium-sized Enterprises Promotion Association, remarked that problems with the unreasonable features in the tax system should be tackled at the root. First, private enterprises are now bearing too heavy a tax burden, and tax rates can be cut by as much as 40%. A distinction should also be made on enterprises’ scale with differential tax rates to be levied while tax breaks should also be given to low-profit small enterprises. In addition, the many fees charged on top of taxes are excessive. While reasonable charges can be turned into taxes, unreasonable charges should be abolished altogether.
Since the outbreak of the SME crisis in September, the relevant government departments have promulgated a host of tax reduction measures for low-profit small enterprises, including cancelling the stamp duty for loan contracts, raising the threshold for VAT and business tax and abolishing 22 types of administrative charges. Zhou said that although these preferential measures might ease slightly the burden of low-profit small enterprises, they fail to tackle the problems at their source.
