Tax Reforms in China: The Year Ahead

Aravind Yelery, Associate Fellow, Institute of Chinese Studies.

China’s ‘new normal’ rate of economic growth also means fall in revenues and possible uncontrolled expenditure patterns in China. In this situation “deepening the reform of the tax system [and] establishment of a modern financial system”[1] become important. The leadership is under overwhelming pressure to revamp its tax system to suit changing fiscal dynamics. The People’s Bank of China (PBoC) is planning to reduce the tax burden on Chinese businesses and raise hopes of economic growth. Since April 2016, the PBoC has convened a series of meetings of its various departments in Beijing to discuss the way forward and plan the ground for the upcoming 13th five year plan and tax reforms were flagged as the top priority.[2] The closed-door meeting called for tax cuts and a gradual expansion of tax bases. This signals a willingness of leadership to take new and concrete steps toward reducing business taxes in China, streamlining the tax system and integrating various tax-related laws in 2016.

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