Shanxi's small businesses get tax breaks to recover from pandemic

Visitors return to the food street in Taiyuan as local restaurants resume their business activities. [Photo by Wu Liuhong for China Daily]

Province's taxation authorities mount efforts to help micro enterprises grow

Liu Haitao, an owner of a restaurant in Taiyuan Food Street, a hub of catering businesses in the Shanxi provincial capital of Taiyuan, was glad to see diners gradually return over the past few weeks.

"The past three years was extremely difficult for small businesses like mine due to the COVID-19 pandemic," Liu said. "I'm satisfied that I can still keep my business moving."

He said the local government has offered crucial support to his operations and that is why he is freed from the worry of bankruptcy.

He especially mentioned the reduction of taxes and charges, saying it was among the most helpful of policy measures the government had implemented to help with economic recovery.

"When smelling the increasingly dense fragrance of various snacks and food, hearing the louder noises of hawking and bargaining, I know everything is back," Liu said. "And we know our future is assured."

The scene on the street is a positive sign of the recovery of business activities in Taiyuan as well as the entire province of Shanxi, especially for small, household operations.

Since the outbreak of the COVID-19 pandemic at the end of 2019, how to help small businesses survive has been a top priority of the taxation administrations at all levels in Shanxi.

An official with the Shanxi Local Taxation Bureau said that the province's taxation authorities have made sustained efforts to help small, micro businesses grow.

"We have made several upgrades to our preferential taxation policies as the pandemic proceeded," the official said.

In 2020, small corporate taxpayers that are composed of mostly household businesses saw their value-added tax decline to 1 percent from the previous 3 percent per their taxable sales revenue. At the same time, they were allowed to delay their personal income tax payments if they had difficulties in operations.

A new policy was released in 2021 allowing small business owners to have a value-added tax exemption for a part of annual business revenue worth 150,000 yuan ($21,450), compared with 100,000 yuan in 2020. A 50 percent reduction in the tax was applied to annual sales revenue between 150,000 yuan and 1 million yuan.

This year, the incentives were further expanded, allowing a periodical exemption of all value-added tax for small businesses in case of difficulties caused by pandemic outbreaks.

In addition to tax reduction and exemption, household businesses also enjoy a reduction in various charges for unemployment insurance, workplace injury insurance and pensions.

In China, the various insurance plans that form the social security system involve the funding contributions from the government, business entities and individuals. The exemption of business contributions means a substantial cut in operational costs.

Local statistics show that, the reduction of taxes for small and micro enterprises in Shanxi amounted to 29.16 billion yuan in a period spanning from 2020 to September this year. The value accounted for 39.94 percent of the total amount of taxation incentives to all enterprises in Shanxi during the period.

The preferential taxation treatment to small and micro enterprises is not simply about subtraction, the official said. He explained that meticulous services are needed to ensure that all business owners can directly benefit from the incentives.

"Small business owners are not always well informed, so we need to make all the new policies known to them," the official said.

"Even if they are informed, they might not be familiar with the procedures in dealing with tax reduction or rebates. In this case, taxation officials will offer them assistance to complete all the procedures. We use subtraction when reducing taxes and addition in offering services," the official added.

The taxation authorities in Shanxi have also strengthened collaborations with other governmental institutions and social entities to better serve taxpayers.

One practice for such collaborations is the one-stop service initiative launched by Shanxi's taxation bureaus, which also incorporates the procedures for collecting charges relating to pensions, unemployment and medical insurance, as well as applications for loans.

In the Yangqu Industrial Park in Taiyuan, for instance, taxation authorities have joined hands with local banks and legal service institutions to hold seminars for household businesses, helping them get familiar with the latest taxation policies, apply for loans on-site and better understand laws and regulations to ensure their rights can be protected.

Ren Zhixia contributed to this story.