Commenting on the recently announced planned reforms to the Chinese tax system, economists have warned that although the measures are likely to boost company profits, they may also contribute the overheating of the country's economy.
Two key areas of the reforms, announced by chief tax official Xie Xuren last week, will exempt firms from VAT on equipment purchases (currently levied at 17%), and unify corporate tax for both domestic and foreign businesses.
The VAT scheme is to be piloted in eight industries in China’s ‘rustbelt’ north eastern industrial zone (including Liaoning, Jilin and Heilongjiang) in order to help foster investment in new technology.
The eight industries set to benefit from the tax reforms are: equipment manufacturing, metals, petrochemicals, automobiles, shipbuilding, hi-tech, military equipment, and agricultural processing.
However, according to the South China Morning Post, observers are already concerned that certain industries, including car manufacturing, may be about to expand out of control, and it is feared that the planned reforms may exacerbate this.
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