From April 1st, China's VAT rate reduction policy will be implemented, and the value-added tax rate of industries such as manufacturing will fall from 16% to 13%. In the context of clear tax cuts, many auto companies, especially luxury car companies, have recently begun a wave of price cuts. Mercedes-Benz first announced that the entire car products enjoy preferential price in advance, with the highest drop of 67,000 yuan. Following the price cut by Mercedes-Benz, BMW also announced that it will cut the price of cars sold in China, with a maximum drop of 60,000 yuan. Subsequently, Jaguar Land Rover also announced that it will downgrade the series of models sold in China. The Land Rover brand has a maximum drop of 85,000 yuan and the Jaguar brand has a maximum price cut of 42,000 yuan. Volvo announced that its model has a maximum drop of 60,000 yuan. Cui Dongshu, secretary-general of the National Passenger Car Market Information Association, pointed out that three points in the manufacturing tax reduction will make enterprises generally benefit from the tax reduction. On the one hand, tax cuts can alleviate the pressure on the manufacturing industry, enhance corporate profitability and industrial vitality, and enable more business operations to improve, thereby promoting the total social consumption. On the other hand, tax cuts will increase corporate profits to a certain extent, and thus have excess funds for expanding reproduction. Since the value-added tax on imported products is levied on the import link, imported cars will also be reduced in price due to the decrease in the VAT rate. Jia Xinguang, executive director of the China Automobile Dealers Association, believes that according to the current automobile industry output value of about 3.5 trillion yuan, minus 3% of the value-added tax, equivalent to 100 billion yuan. In 2017, the profit of key enterprises was about 400 billion yuan, which is equivalent to an increase of 25% of profits. However, due to the long chain of automobile manufacturing industry and the reduction of taxes to the final link, the price impact will not be too great. Luo Lei, deputy secretary-general of the China Automobile Dealers Association, said that due to factors such as the reduction of comprehensive tariffs and the reduction of the VAT rate, although it will not have a large impact in the short term, in the long run, it may lead to the overall price of domestic luxury cars. Explore and stimulate the automotive consumer market. Jiang Zhen, an associate researcher at the Institute of Finance and Economics of the Chinese Academy of Social Sciences, told the reporter of the Economic Information Daily that the value-added tax is an extra-tax, and the reduction in the tax rate can obviously bring down the price, which is a major positive for stimulating consumption. The manufacturing tax rate is reduced by 3 points, and the benefits are most obvious. At the same time, if a company uses manufacturing as input and raw materials, the downward adjustment of the manufacturing tax rate will directly reduce the input costs of many enterprises through chain transmission, and make these enterprises cost burdens. The downside is significant, which is conducive to enterprises to go into battle, and can also make room for better technology R&D and innovation upgrades. Li Jun, the managing partner of PwC China and Hong Kong indirect tax services, also told reporters that VAT, as the main tax of indirect tax, will be transmitted through the deduction mechanism, which will help to further release domestic consumption energy. Promote sustained and healthy growth of the Chinese economy.
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The VAT rate will be lowered to open the price reduction space will release the consumption potential
Abstract From April 1st, China's VAT rate reduction policy will be implemented, and the value-added tax rate of industries such as manufacturing will fall from 16% to 13%. In the context of clear tax cuts, many auto companies, especially luxury car companies, have recently begun a wave of price cuts. Messer...