Limited benefits or effective burden reduction？The new policy of tax and fee cuts has been put into effect

After the “two sessions” held this year， the state has continuously implemented massive tax and fee cuts. Deepening VAT reform is undoubtedly one of the “main course” in this “big meal” of tax and fee cuts， and the real economy is the main service object of this “main course”.

Deepening VAT reform policy was implemented on April 1st. This tax and fee cuts for domestic manufacturing industry is closely related to textile enterprises. What impact does the countrys tax and fee cuts have on the cotton textile industry？ How much benefit can cotton spinning enterprises get from it？

VAT cut to lower the corporate burden

For cotton spinning enterprises， taking the method of value-added tax deduction for textile enterprises in Henan Province as an example， according to the purchase price of 15，600 yuan per ton of cotton （including tax price） and the sale price of cotton yarn 23，000 yuan （including tax price）， the original value-added tax rate is 16%. After calculation， the enterprises have to pay 676 yuan for each ton of cotton yarn. From April 1， the state reduced the value-added tax by 3 percentage points， still taking the price of cotton and cotton yarn as an example， and levied at the rate of 13%. After calculation， the value-added tax payable by enterprises for each ton of cotton yarn production is 564 yuan. This means that after the tax rate drops by 3 percentage points， the tax payable per ton of cotton yarn is reduced by 112 yuan， and the tax payable per ton of cotton yarn is reduced by 16.6%. For such calculation results， industry insiders said that the above is only a theoretical calculation method， because the purchase price of cotton and cotton yarn are in dynamic change.

Hu Yijian， professor of Shanghai University of Finance and Economics， said that from the national point of view， it was estimated that the current value-added tax （VAT） rate of 16% to 13% would be reduced by more than 630 billion yuan.

According to the calculation of Henan Provinces yarn output of 3.46 million tons in 2018， the average annual tax burden of textile enterprises in Henan Province has been reduced by 346 million yuan. For the state， tax cuts are not small. For enterprises， it adds up to quite a lot.

The new VAT cut policy is the first big gift for yarn enterprises after the Spring Festival. The head of a textile enterprise in Henan said that in March， many downstream enterprises signed purchase and sale contracts in advance in order to offset more VAT， resulting in a sharp increase in the number of orders received by textile enterprises. Some textile enterprises advance payment orders have been scheduled for more than 20 days， but since April， this has gradually “cooled down”.

Tax and fee cuts to increase investment confidence

The reduction of VAT benefits the yarn enterprises. Of course， the benefits of enterprises are far more than that. Recently， Liu Kun， Minister of Finance of China， said： “Starting from May 1st， the government will also cut the share of enterprise contributions to urban workers basic old-age insurance from 20 percent to 16 percent， effectively reducing the proportion of social insurance contributions for enterprises. Experts predict that lowering the social security premium rate will reduce the cost of enterprises by 800 billion yuan.

Taking a textile enterprise in Luohe as an example， the number of employees in the enterprise is 400， the annual output of yarn is 8，000 tons， the enterprise pays pension insurance for employees according to 60% of the local average social wage. At present， the enterprise pays 502 yuan per employee per month， after the social insurance premium rate drops to 16%， the calculation result is 403 yuan， the social insurance premium rate drops by 4 percentage points， which can save 100 yuan per employee per month， and it saves 420，000 yuan annually for enterprise. By tax and fee cuts， a total of 1.22 million yuan can be saved annually for the enterprise. If we look at the whole country， we expect to reduce the burden of corporate tax and social security contributions by nearly 2 trillion yuan in the whole year.

Not only the textile enterprise， but also many yarn enterprises generally believe that， the implementation of larger scales of tax and fee cuts help improve enterprise profits， alleviate capital pressure， and solidify their confidence in business development.

Liu Zibin， chairman of Luthai Textile Co.， Ltd.， said： “70% of Luthai Textile products are sold overseas， of which high-grade fabrics account for 20% of the worlds similar market. The new tax policy will bring more than 52 million yuan tax cuts to the company throughout the year.

Relevant professionals believe that reducing VAT rate and social security contribution rate can significantly reduce the tax burden of enterprises and bring positive impact to manufacturing enterprises， such as effectively reducing operating costs. These funds can be used in the conversion of old and new production capacity， expanding production lines， improving production efficiency， strengthening product research and development， and thus effectively enhancing the core competitiveness of enterprises. In the highly competitive industries， some tax cut dividends will also be passed on to the final consumers through product price reduction， thus stimulating demand and boosting corporate profit growth.

Experts believe that since last year， Chinese cotton spinning industry has been affected by SinoU.S. trade. The weakness of consumption and export in the downstream of Chinas cotton spinning industry has a great impact on cotton prices. Through this tax and fee cuts reform， it will play an important role in lowering the operating costs of the cotton spinning industry chain， stimulating market vitality， enhancing the competitiveness of domestic textile enterprises and hedging fluctuations in the international export market.