Enterprise income tax rates will be reduced for eight industries by different margins, according to a statement from the State Administration of Taxation issued on September 17. The new rates will go into effect as of January 1, 2008.
According to the statement, tax rates for entertainment, catering, retail and wholesale industries will be reduced significantly.
However, the nation's top taxation regulator repeated that in the meantime enterprises engaged in real estate development would remain at their original tax rate.
Beijing taxation authorities revealed that some 20,000 enterprises would benefit from the new policy.
Although the new rates will not come into effect until next year, the measure has been warmly acclaimed nationwide. A small restaurant owner in Beijing's Chongwen District said that she formerly thought it difficult to run her business. After hearing the news she felt more confident because the government had provided her with the policy.
When the new rates go into effect, for example, a small restaurant with a monthly income of 100,000 yuan will save 6,600 yuan in enterprise income taxes.
"After analyzing statistics from different industries and regions, we found that the tax rate is comparatively higher for smaller enterprises," an official in charge of enterprise income tax in the State Administration of Taxation was quoted as saying in an interview. "So we decided to reduce the tax rate and lower the burden of these smaller enterprises."
Currently in China, there are a large number of small businesses. Their taxes account for only a small portion of the nation's total tax revenue. Reducing small business tax will not lead to an overall reduction of national tax revenue. In fact, the lowered tax rate is expected to stimulate the enthusiasm of small business owners.
According to available statistics by the end of June 2006, there were over 4.3 million small and medium-sized enterprises registered with government revenue authorities. The total value they produced accounted for nearly 60 percent of the nation's GDP. Their taxes supplied nearly 50 percent of nation's tax revenue.
Appendix: Taxable Income Rate of 8 Industries
| Industry |
Taxable Income Rate (%) |
| Agriculture, Forestry, Husbandry and Fishing |
3-10 |
| Manufacturing |
5-15 |
| Wholesale and Retail Business |
4-15 |
| Communications and Transportation |
7-15 |
| Construction |
8-20 |
| Catering |
8-25 |
| Entertainment |
15-30 |
| Others |
10-30 |
(China.org.cn by Chen Xia, September 18, 2007)
