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One article understands unprecedented fiscal policy: cut taxes and fees, increase debt, and spend good money

TIME:2020-09-30 SOURCE:admin VIEWS:216 times

The government work report disclosed a package of fiscal measures to stabilize the economy.

On May 22, the Third Session of the 13th National People’s Congress opened in Beijing. Premier Li Keqiang made a report on the work of the government.

Regarding the fiscal policy that has attracted much attention from the market, the fiscal deficit rate is planned to exceed 3.6%, and the fiscal deficit will increase by 1 trillion yuan over last year, reaching 3.76 trillion yuan, a record high. Extend and postpone the new policy of large-scale tax and fee cuts, and the new tax and fee cuts for enterprises increased by 2.5 trillion yuan throughout the year. The first issuance of 1 trillion yuan in anti-epidemic special treasury bonds to protect employment, basic people’s livelihood, and market players. New special bonds issued by local governments were 3.75 trillion yuan, an increase of 1.6 trillion yuan over last year, for investment in major infrastructure projects.

A reporter from China Business News learned that the scale of the deficit, the scale of special treasury bonds, and the scale of local government special bonds in the government work report this year are in line with previous market expectations, and the fiscal policy is relatively strong.

In addition, another focus of fiscal policy this year is to optimize the structure of fiscal expenditures and improve quality and efficiency. For example, non-urgent non-rigid expenditures at the central level should be reduced by more than 50%, and funds will be used for people’s livelihood and expenditures in key areas.

Deficit rate breaks 3% for the first time

Li Keqiang said that a proactive fiscal policy should be more proactive. This year’s deficit rate is planned to be 3.6% or more. The fiscal deficit will increase by 1 trillion yuan over last year. At the same time, 1 trillion yuan of anti-epidemic special treasury bonds will be issued. This is a special move in a special period. All of the above 2 trillion yuan will be transferred to local governments and a special transfer payment mechanism will be established. The funds will go directly to the basic level of cities and counties to directly benefit enterprises and the people. They are mainly used to ensure employment, basic people’s livelihood, and market entities, including support for tax and fee reductions. Rent and interest rate cuts, expansion of consumption and investment, etc., strengthen the nature of public finances, and never allow embezzlement.

In 2019, my country’s fiscal deficit rate was 2.8%, and the fiscal deficit was 2.76 trillion yuan. This year it is clear that the scale of the fiscal deficit will increase by 1 trillion yuan over the previous year, reaching 3.76 trillion yuan.

Active fiscal policy is an expansionary fiscal policy. A key indicator reflecting the intensity of expansion is the fiscal deficit rate. The higher the deficit rate, the larger the fiscal deficit and the greater the fiscal intensity. In my country, the part of the national general public budget expenditure that exceeds revenue is the fiscal deficit; the fiscal deficit as a proportion of GDP is the fiscal deficit rate.

A number of fiscal and tax experts told China Business News that the further increase in the scale of the fiscal deficit will help ease the contradiction between fiscal revenue and expenditure, support local governments to protect people’s livelihood and ensure operations, and also support large-scale tax cuts and fee reductions to reduce burdens for enterprises, which has released a positive signal. Conducive to stability and boost market confidence.

Generally, during the economic downturn, my country will adopt a proactive fiscal policy, and increasing the fiscal deficit rate reflects the further increase in policy stimulus.

According to official data, since the reform and opening up, my country’s fiscal deficit rate has always remained below 3%. After the Asian financial crisis broke out in 1998, the deficit rate exceeded 1% for the first time. In response to the 2008 financial crisis, my country has been adopting a proactive fiscal policy since then. Generally speaking, the nominal fiscal deficit rate fluctuates upward, and the scale of the deficit continues to expand. In 2016 and 2017, the deficit rate reached a peak of 3%.

The substantial increase in the fiscal deficit rate this year is a realistic requirement for the decline in fiscal revenue and the increase in fiscal rigid expenditures under the impact of the epidemic, and the widening of the balance of revenue and expenditure.

In the first four months of this year, the national general public budget revenue has rarely fallen sharply by 14.5%. During the same period, the national general public budget expenditure exceeded the revenue by about 1.15 trillion yuan.

At the same time, the increase in the fiscal deficit rate is also an important tool for proactive fiscal policy, which is conducive to the implementation of the “six stability” and “six guarantees” and supports large-scale tax cuts and fee reductions. According to the State Council’s estimates, the new and old tax and fee reduction policies are expected to reduce the burden of enterprises and other market entities by 2.5 trillion yuan this year.

At present, my country’s debt risk is controllable, which also objectively supports the short-term increase of the fiscal deficit rate. According to data from the Ministry of Finance, as of the end of 2018, my country’s government debt ratio (debt balance/GDP) was 37%, of which the local government debt ratio was 76.6%, which was significantly lower than the internationally accepted warning standard of 100%-120%.

Anti-epidemic special national debt finalizes 1 trillion yuan

The government work report clarified that the scale of this year’s anti-epidemic special national debt is 1 trillion yuan. The 1 trillion yuan in deficit and the 1 trillion yuan in anti-epidemic special treasury bonds totaling 2 trillion yuan will be directly used to ensure employment, basic people’s livelihood, and market players, including supporting reductions. Reduce taxes and fees, reduce rents and interest rates, expand consumption and investment, etc., strengthen the nature of public finances, and never allow embezzlement.

Different from ordinary national debt, special national debt is a national debt issued to serve specific policies and support specific projects. It is not included in the general public budget. Its issuance does not affect the size of the deficit and the deficit rate, but it is still government debt. The scope of use of this special anti-epidemic treasury bond focuses on the grassroots government, and the scope is wide, which is conducive to alleviating the pressure on grassroots three guarantees.

Historically, my country issued two special national bonds in a narrow sense in 1998 and 2007. The scale of the issuance of special treasury bonds in 1998 was 270 billion yuan, the purpose of which was to improve bank capital shortages. In 2007, the scale of the issuance of special treasury bonds was 1.55 trillion yuan, and the funds were used to establish the State Foreign Exchange Investment Corporation-China Investment Corporation.

In the two special treasury bond issuances mentioned above, after the bank purchased the special treasury bonds, the central bank purchased the special treasury bonds from the banks. In this way, the central bank purchased the treasury bonds from the secondary market instead of directly buying treasury bonds, which is prohibited by law.

Recently, there has been heated discussion about the central bank’s direct purchase of anti-epidemic special treasury bonds in the primary market, that is, whether the fiscal deficit can be monetized is not yet clear. However, most experts and scholars do not support the monetization of fiscal deficits.

The biggest tax cut and fee reduction in history

Li Keqiang said that he would increase tax and fee reduction efforts. Strengthen phased policies, combine with institutional arrangements, release water to raise fish, and help market players to relieve their development. This year, we will continue to implement systems such as lowering the value-added tax rate and corporate endowment insurance rates, and increase taxes and fees by about 500 billion yuan. The tax reduction and fee reduction policies that expire before June have been introduced in the early stage, including exemption from the payment of pension, unemployment and work injury insurance units for small and medium-sized enterprises, reduction and exemption of value-added tax for small-scale taxpayers, and exemption from public transportation, catering and accommodation, tourism and entertainment, and culture The value-added tax for sports and other services, the reduction or exemption of civil aviation development funds, and port construction fees, are all extended to the end of this year. Income tax payment for small and micro enterprises and individual industrial and commercial households will be postponed until next year.

He said that it is expected to reduce the burden of enterprises by more than 2.5 trillion yuan throughout the year. We must resolutely transfer the tax and fee reduction policy to enterprises, so as to keep the green hills and win the future.

Last year, the scale of tax cuts and fees in my country was as high as 2.36 trillion yuan, which is known as the largest tax and fee reduction in history. In the face of the impact of the epidemic this year, the scale of new tax cuts and fee cuts hit a new high.

Specifically, this year’s tax and fee reduction policy reflects the simultaneous implementation of institutional arrangements and phased policies, focusing on reducing the tax burden of small, medium and micro enterprises, individual businesses and enterprises in difficult industries. In addition, the effective social insurance premium reduction and exemption policies for small, medium and micro enterprises in the early period have continued until the end of the year, and the general delay in tax payment for three months has been extended to one year.

Special debt hit a record high

To cope with the impact of the epidemic, it is necessary to stabilize the economy to stabilize investment, especially government-led infrastructure investment. Stable investment is an important financing tool. Local governments have added special bonds. In recent years, the scale of special bond issuance has continued to expand, and this year is a record high.

Li Keqiang said that this year plans to allocate 3.75 trillion yuan in local government special bonds, an increase of 1.6 trillion yuan over last year, to increase the proportion of special bonds that can be used as project capital, and 600 billion yuan in investment in the central budget.

Special bonds are government bonds issued by local governments for public welfare projects with a certain amount of income. The funds raised are used for the construction of major projects such as infrastructure. They are called “Chinese version of municipal bonds.” Since the special debt emphasizes the balance between financing and income, it is not included in the scope of deficit statistics. The expansion of the special debt reflects the active fiscal policy.

In 2015, China issued the first local special bonds with a scale of 100 billion yuan. Since then, the scale of special bond issuance has continued to expand, reaching 2.15 trillion yuan in 2019.

This year, the Ministry of Finance has issued 2.29 trillion yuan ahead of schedule, and local governments are actively issuing bonds, striving to issue all bonds before the end of May. After the approval of the 3.75 trillion yuan quota, it means that a special debt quota of 1.46 trillion yuan will be issued to local governments.

In order to give full play to the role of special debt funds in stabilizing investment, the State Council has made major changes to the investment direction of special debt this year. At present, special bonds have been invested in infrastructure such as municipal construction, transportation, education, science, culture, and health services, agriculture, forestry, water conservancy, ecological environmental protection, and energy projects.

In May, the Ministry of Finance optimized the investment direction of special debts, including new infrastructure such as 5G, data centers, artificial intelligence, public health and emergency medical treatment, and the transformation of old communities in cities and towns. These are already in the local debt issuance in May. reflect.

Not only has there been a significant change in investment direction, local governments have also actively used special debt to raise capital for major projects that meet the requirements. This year, this proportion has increased to 25%. In the first quarter, a total of 67.63 billion yuan of special bonds were used as project capital and invested in 130 projects across the country, a significant increase from last year. The use of special bonds as capital can give full play to the leverage of funds (approximately 2 times), and better bring out the benefits of funds.

Optimize expenditure structure and increase capital effect

Li Keqiang emphasized that this year we must vigorously optimize the structure of fiscal expenditures. Basic people’s livelihood expenditures should only increase without reduction. Expenditures in key areas should be effectively guaranteed. General expenditures should be resolutely reduced. New buildings and halls should be strictly prohibited, and extravagance and waste should be strictly prohibited. Governments at all levels must really live tight. The central government must take the lead. The central government has arranged for negative growth in expenditures. Among them, non-urgent non-rigid expenditures should be reduced by more than 50%. All types of surplus and deposit funds must be collected and re-arranged. To vigorously improve quality and efficiency, various expenditures must be carefully calculated, every money must be spent on the cutting edge and important points, and the market entities and the people must have a real feeling.

China’s current fiscal expenditure scale exceeds 30 trillion yuan. How to make good use of this fund and give full play to the efficiency of fund use is also an important connotation of the current active fiscal policy.

The government continues to stay tight and drastically reduces non-rigid key general expenditures, which has become a highlight of this year’s fiscal policy.

Last year, the central government reduced general expenditures by an average of 10% and reduced the “three public funds” by 3.8%. Local governments also vigorously reduced general expenditures. This year, the central government has proposed to reduce non-urgent non-rigid expenditures by more than 50%, which is staggering. This also sends a signal to local governments that they will be more vigorous to pass the tight days.

The funds saved by the government’s tight schedule are mainly used in areas such as people’s livelihood. For example, this year the per capita financial subsidy standard for resident medical insurance will be increased by 30 yuan, the basic pension for retirees will be raised, and the minimum standard for basic pension for urban and rural residents will be raised.

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