While the Chinese government has ushered in significant tax reduction policies and measures, many companies have seen little benefit. Hu Yijian, a professor at Shanghai University of Finance and Economics, has offered his thoughts in an interview with Shanghai-based news portal The Paper.
Hu said the main reason is that tax reduction policies are proposed during an economic downturn. The sluggish economy results in decreasing company profits, and many enterprises and residents face a stock slump. Even if the central government implements a large scale tax reduction, the effects will not be obvious.
According to Hu, during an economic downturn many companies have to face challenges like higher management costs; thus, further tax reductions are still necessary and inevitable.
To support the development of the real economy fees and costs must be reduced and preferential treatment should be provided for firms that actually produce goods and services. In this way, more funds and talent will flow to the real economy.