November 3, Local governments in East China’s Zhejiang province have pledged to offer more incentives to help troubled small enterprises with their finances, as rising borrowing costs and slower demand for their goods threaten a second wave of bankruptcies.
On Oct. 30, the Ningbo government issued 26 rules with the aim of promoting small businesses in the city, 8 of which are tax-related, according to Lian Ping, deputy director of the local tax bureau. The rules involve some RMB 2 billion ($315 million) in financial support.
“One of the 8 rules is to cut taxes by 50% for small enterprises that are subject to less than RMB 60,000 in annual tax payments before Dec. 31, 2015. This rule would benefit at least 13,000 local taxpayers,” Lian told the 21st Century Business Herald.
The local government of Hangzhou is working on setting up an emergency fund, and has asked commercial banks in the city to provide more credit support to small businesses. The emergency fund, led by the local branch of the Ministry of Finance, is expected to raise some RMB 800 million in the first phase.
In addition, Hangzhou has canceled 31 charges for small businesses to ease their financial pressures.
In Huzhou, the local government has agreed to give some small businesses an extra 3 months to pay their taxes, and said it would also cancel taxes including land tax and property tax but did not specify how long the cancellation would last.
“The central government has raised the thresholds for value-added and business taxes on small enterprises starting Nov. 1, and when it comes to Huzhou, that means small enterprises have been freed from some 50% of their original business tax payments,” an official from the local economic and information technology commission told the 21st Century Business Herald.
“But honestly, all these tax cuts could only help them [small businesses] in the short term, and don’t necessarily solve long-term problems,” the person said.
On Nov. 1 China raised the threshold for value-added taxes on small enterprises to RMB 5,000-RMB 20,000 on monthly sales revenues, up from the previous threshold of RMB 2,000-RMB 5,000.
The threshold for business tax has been lifted to RMB 5,000-RMB 20,000 from RMB 1,000-RMB 5,000 previously.
Bankruptcies
Governments in Zhejiang, a province famed nationwide for its strong concentration of entrepreneurs, are rushing to launch new policy supports amid fears that small local businesses could experience a second wave of bankruptcies if not given proper help.
“Many of these small businesses, especially those with a hand in the real estate sector, are facing severe cash strains, and if the property market continues to be the way it is now, these businesses may end up taking the very first blow,” Cai Hua, secretary general of the provincial council for promoting local businesses, told the 21st Century Business Herald.
Taizhou, another city in Zhejiang, saw a 41.1% increase in the number of small businesses in the red between January and August, up 0.7 percentage points compared to the first 6 months of this year, according to data from the local statistics bureau.
The data also showed that nearly 56% of the small businesses polled consider market conditions to be “average” or “bad”.
“Generally speaking small businesses in Zhejiang could only survive 3-6 months of high costs of financing, and once one of them goes wrong, the rest will follow suit and by that time the whole industrial chain is likely to be broken,” said Luo Zhongwei, director of the research center for small-and medium sized enterprises under the Chinese Academy of Social Sciences.
Source:21cbh.com