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China says tax reform to support economy, structural changes
[BEIJING] China's value-added tax reforms will help support the economy and speed up structural adjustments, vice finance minister Shi Yaobin said on Tuesday, playing down concerns such reforms could fan property speculation.
China will replace a business tax with a value-added tax in its construction, real estate, financial and consumer services sectors, effective from May 1, and the government hopes to cut taxes by more than 500 billion yuan (S$104 billion) in 2016.
"This will help stabilise economic growth...and also help improve economic structures," Mr Shi told a news conference.
The VAT reform, which was launched in 2012 as a trial programme, has been applied to railway transportation, postal services, telecommunications and some service sectors.
The VAT reform since 2012 has already reduced firms' tax burdens by more than 600 billion yuan, Mr Shi said.
The ministry said in a statement that implementing VAT reforms in the construction, real estate, financial and consumer services sectors will be more complicated and difficult.
But Mr Shi played down concerns that the VAT reform, which will allow firms to include real estate in the scope of tax deductions, will lead to a property buying spree.
Top leaders have already pledged to cut taxes and expand the government budget deficit this year to support economic growth, which slowed to its lowest level in 25 years in 2015.