Chinese Premier Li Keqiang chaired an executive meeting of China's State Council on March 28, at which he announced a lowering of the value-added tax (VAT) rates from 17 percent to 16 percent for manufacturing and from 11 percent to 10 percent for transportation, construction, basic telecommunication services and farm produce, as of May 1 this year. It is estimated that the decision will result in a reduction of RMB 240.0 billion ($38.2 billion) in tax revenues in 2018.
Premier Li said that VAT reform was a major step in China's tax regime reform.
"The VAT reform has helped to reduce the overall corporate tax burden, and improve the tax regime. The reform has proven to be conducive to the transformation and upgrading of the economy, unifying the tax structure and making taxation fairer," Li said.
This round of tax cuts will apply to all manufacturing companies. All businesses registered in China, be they joint ventures or wholly foreign-owned companies, will be treated equally, according to the premier.
Market analysts stated that this tax cut will reduce the tax burden on the steel industry by RMB 25.1 billion annually, while a bigger impact is anticipated in downstream industries, which will also exert a positive impact on the steel industry.