Fiscal Policy Is Facing A Dilemma As Tax Cuts And Spending Pressures Coexist.

Export industries represented by textiles call for adjustment of export tax rebate policy

After the publication of the semi annual data, despite the frequent calls for tight monetary policy, we have continued to adhere to tight monetary policy and moderately relaxed fiscal policy as a more feasible option.

Among them, fiscal policy is highly regarded as the key to defuse the possible stagflation situation, and because of the pressure of fiscal expenditure, fiscal policy is facing a dilemma of limited operation space.

Businesses and academics call for tax cuts.

"Textile industry is facing multiple pressures such as RMB appreciation, export tax rebate reduction, labor and raw material costs rising, and now it has been unable to sustain it. If we do not adjust the relevant policies, I am afraid the consequences will be unthinkable."

At a seminar on corporate social responsibility in mid June, in response to Ou Xinqian, deputy director of the Ministry of industry and information technology, Qiu Yafu, chairman of Shandong Ruyi group, a large textile enterprise, said.

In many unfavorable factors, the sharp reduction of export tax rebate and the appreciation of RMB are considered the two most influential factors.

In July 1, 2007, the export tax rebates of 553 "two high" products were abolished, and the export rebate rate of 2268 commodities that easily caused trade friction was reduced.

In response to the appeal of enterprises, the decision makers quickly responded.

According to media reports, the export tax rebate policy adjustment plan has been submitted to the State Council and will be selected.

Gao Hucheng, Vice Minister of Commerce, said at a conference on Monday that support policies will be introduced at the right time to help textile industries such as export problems.

The textile industry is only a microcosm of China's economy. Facing the internal and external market environment, reducing tax burden, helping enterprises reduce costs and tide over difficulties have become the consensus of enterprises and academics.

Ha Ji Ming, chief economist of CICC, told the first Financial Daily yesterday that China's economy is facing challenges that have never been encountered before. Inflation and GDP growth are all changing in the same direction. This time there has been a change in the opposite direction. Special attention should be paid to monetary policy and fiscal policy.

Ha Jiming suggested a structural adjustment in tax revenue, a moderate reduction in personal income tax, and a selective adjustment in the export tax rebate.

"If the growth rate of investment is substantially adjusted, we can consider the reform of value-added tax in full swing, from production based value-added tax to consumption based value-added tax, allowing capital expenditure to be fully paid before taxes."

Li Daokui, a professor at the school of economics and management at Tsinghua University, also suggested that in the two quarter economic analysis conference, in the face of possible stagflation, we should innovate policy thinking and manage the total supply. The concrete measures are to take measures to help enterprises reduce costs. On the one hand, they can cope with the pressure of inflation, and on the other hand, they will not reduce output and the economy can maintain growth.

Regular expenditure is increasing rapidly.

The call for tax cuts coexists with concerns about the pressure of fiscal expenditure. The Ministry of Finance issued a notice in July 8th, saying that the expenditure pressure next year is expected to be greater, requiring all departments to increase revenue and reduce expenditure.

Bai Jingming, deputy head of the Scientific Research Institute of the Ministry of finance, told the first Financial Daily yesterday that there are three main reasons for the pressure of financial expenditure. First, the equalization strategy of public services is progressively advancing. The equalization of public services between urban and rural areas means increasing expenditure.

The second is to resolve many contradictions in the rapid economic growth, which require a large amount of expenditure, including inflation, resource scarcity and environmental destruction.

Third, expenditure on maintaining social stability, including public safety, social security and employment, has increased rapidly.

In this year's budget, the budget for social security and employment expenditure exceeds 660 billion yuan, ranking fourth in all expenditure items.

Bai Jingming believes that the expenditure on earthquake reconstruction is not the reason for increasing pressure on fiscal expenditure. The gradual establishment of public financial system and the rapid increase of various conventional expenditures are the reasons.

According to the introduction, from 1 to May this year, public security expenditure increased by 20%, social security and employment expenditure increased by 41%, while environmental protection expenditure increased by 98% over the same period last year.

"Although the growth of China's fiscal revenue is fast, the growth of fiscal expenditure is faster, and this will be a long-term trend."

Bai Jingming said.

Bai Jingming said that under the pressure of larger fiscal expenditure, there is little room for further tax cuts.

On the one hand, income tax, including corporate income tax and personal income tax, has already implemented tax reduction reform measures. The deduction of personal income tax has increased to 2000 yuan, and the tax rate has been reduced from 33% to 25% after the merger of two corporate taxes.

In addition, the agricultural tax has been abolished, and the pformation of value-added tax has also been carried out in the northeast and central China.

In this regard, Ha Jiming said that fiscal policy still has room for operation. This year's budget, 14% of the revenue growth is expected to be relatively conservative.

According to the statistics released by the National Bureau of statistics, the fiscal revenue growth rate reached 30% in the first half of the year. The annual growth rate of conservative estimates will not be less than 24%, so that the over budget revenue will exceed 500 billion yuan.

The increase in post earthquake reconstruction is only 1000 billion yuan.

Bai Jingming said that the current fiscal policy has played a better role in regulating the economy, and China's economic growth will not decline significantly. We should continue to adhere to a prudent fiscal policy, while ensuring steady growth in the supply of public goods. On the other hand, we will not guarantee a serious financial crisis and avoid inflationary pressures.