October 22, 2021

Deepening the VAT reform, manufacturing VAT rate dropped by 3%

On March 5, Premier Li Keqiang, on behalf of the State Council, made a government work report to the Second Session of the 13th National People's Congress, proposing to reduce the tax burden of manufacturing and small and micro enterprises and deepen the reform of value-added tax.

Among them, the current 16% tax rate in industries such as manufacturing fell to 13%. In the paper packaging industry chain, up to the paper mill, down to the carton factory, can alleviate the capital pressure and increase the profit rate of the company in this significant 3% tax reduction.

The manufacturing value-added tax rate will drop by 3%, and the paper packaging industry chain will directly benefit

Value-added tax is currently the largest tax category in China, and it is one of the main sources of taxation in China, and it is also the focus of tax reduction. In 2018, the value-added tax revenue was 615.29 billion yuan, accounting for nearly 40% of China's tax revenue.

On May 1, 2018, the VAT rate in the manufacturing and other industries fell from 17% to 16%. VAT rates for goods such as agricultural products, as well as transportation, construction, and basic telecommunications services have fallen from 11% to 10%.

In this government work report, Premier Li Keqiang further proposed that the focus will be on reducing the tax burden on manufacturing and small and micro enterprises, and deepening the VAT reform:

1. Reduce the current 16% tax rate of industries such as manufacturing to 13%;

2. Reduce the current 10% tax rate of the transportation industry and construction industry to 9%, and ensure that the tax burden of major industries is significantly reduced;

3. Maintain a 6%-grade tax rate unchanged, but adopt measures such as increasing tax deductions for production and life service industries;

4. Ensure that the tax burden of all industries is only reduced, and continue to move toward the third-grade and two-speed tax rate and the simplified tax system.

The 16% tax rate taxable items include raw materials, equipment, etc. Reducing this tax rate can produce greater tax reduction effects. Obviously, manufacturing industries including upstream and downstream enterprises in the paper packaging industry chain benefit greatly.

What is the tax reduction of 3% for paper packaging companies?

Paper packaging enterprises belong to the manufacturing industry, while manufacturing is a highly competitive industry. The profit margin is inherently thin. Coupled with the superposition of various costs, paper packaging enterprises can be said to be carrying forward in the past two years:

1. The price of raw materials fluctuates drastically, resulting in an increase in operational risks;

2. Environmental protection continues to be high pressure, which increases environmental protection costs;

3. Labor costs and land rents have risen almost year after year;

4, the tax is too heavy, so that the production enthusiasm of the company is lowered.

High cost, where is the profit? This sentence is not only a simple blame, but also a myriad of physically and mentally exhausted and exhausted, and the SME boss who is bent on developing but has no choice but to be persistent.

Therefore, the VAT tax reduction of 3%, for paper packaging companies, is a long-term drought and rain, is an oasis in the desert, is a real and significant positive measure to directly increase profit margins!

This regulation is obviously beneficial to manufacturing industries including papermaking enterprises, paper packaging enterprises and printing enterprises. It can not only reduce its financial pressure, improve corporate profitability, but also promote its production enthusiasm and mobilize the vitality of the national economy.

In fact, this also strengthens the confidence of the company. From the point where the VAT rate was lowered by 1 point last year, and the measures to reduce the inclusive tax cuts for small and micro enterprises by the beginning of this year, and then the tax reduction of 3% now, this fully demonstrates that the actual problems of enterprises are being concerned by the state. Solved.

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