Article: China doubles down on tax cuts in race to halt economy’s slide (2019/01/18)
BEIJING — China is sticking with a large-scale tax cut strategy deployed last year to keep the economy humming,
adding to the 1.3 trillion yuan ($192 billion) of relief already in place with further cuts to income taxes and social
security premiums.
Speaking with business leaders this week, Premier Li Keqiang said growth must remain within a reasonable range,
with no sharp drop-off. The tax reduction program for 2019, set to be announced in March, is projected to top 1.5
trillion yuan. The People’s Bank of China also lowered the reserve requirement for commercial banks this month,
following up on a few reductions last year. The tax cuts, coupled with the central bank’s monetary easing, signal a
resolve to pull out all the stops to avert an economic slowdown amid the trade war with the U.S.
Trade data published Monday showed that Chinese exports and imports in dollar terms each fell on the year in
December. Reliance on tax relief also reflects a shift away from the nation’s go-to stimulus method of public works
projects.China’s tax cuts and other relief for 2018 were originally planned at around 1.1 trillion yuan, but the onset
of an economic slowdown prompted deeper cuts. At last month’s Central Economic Work Conference, leaders called
for a “larger scale of tax and fee cuts” in 2019. Li is expected to reveal the scale of the reductions in a government
work report at the National People’s Congress.
Reductions to the individual income tax have already been expanded this month. A further six deductions to taxable
income — such as for costs incurred from children’s education, treating serious illnesses, home loan interest and rent
— were added to the existing four, which covered items like reserve funds for homes and unemployment insurance.
The new deductions will lower taxes by an annual 116 billion yuan, Japanese brokerage Nomura Securities
calculates.
China raised this past October the minimum taxable income, aiming to line consumers’ pockets and stimulate
