The advantages and disadvantages of tax cuts for SMEs Recently, the topic of SMEs has heated up. Some media reported that the bankruptcy of SMEs is on the rise, and enterprises in the eastern coastal areas have stopped working, stopped production or even closed down. This is since 2008. A similar situation has occurred for the first time since the economic crisis. Unlike the 2008 economic crisis. At that time, only the economic situation in the United States was sluggish, and corporate orders were still there. But now the heavy taxation makes SMEs gradually indebted, and bankruptcy seems to be the ultimate destination for most SMEs. Jiang is the chief financial officer of a biochemical technology company. This private enterprise has 200 employees. It pays 2 million yuan in income tax, 3 million yuan in value-added tax, 500,000 yuan in business tax, and 350,000 yuan in turnover tax. The stamp duty, deed tax of 10,000 yuan, and social insurance premium of about 3.3 million yuan. A total of about 9.3 million yuan in taxes and fees accounted for about 48% of the company's pre-tax profits. The heavy tax burden has made Jiang's company difficult. In recent years, taxes and fees have risen year by year. According to statistics, the average life expectancy of SMEs in China is 3.7 years old, and the biggest cause of death of these enterprises is the taxes collected by tax collectors. At present, China's division of SMEs still uses the 2003 standards. Many companies are forced to pay a lot of taxes every year because of the “vacuum†of relevant laws. If you want SMEs to have a good living space, then they must reduce taxes and must release the heaviest "shackles" tied to Chinese SMEs. Tax reduction and exemption includes two parts, one is tax reduction, and the other is tax exemption. Tax reduction is a tax exemption for taxpayers in accordance with tax laws and regulations. Tax reduction It is a special provision for the support, encouragement or care of certain taxpayers and tax collectors to reduce their tax burden. Tax reductions are generally divided into statutory tax deductions, specific tax deductions, and temporary tax deductions. Tax exemption refers to the complete exemption of tax payable by taxpayers, but tax exemption only takes such measures for certain industries that need special support. We all know that tax cuts have advantages and disadvantages. The drawback is that the state will reduce fiscal revenue, and the intensity of the country's macroeconomic regulation and control may be affected. The advantage is to alleviate the financial problems of SMEs and reduce the financial costs of SMEs. The trade-off between advantages and disadvantages is a very difficult thing to do. The supply school represented by Laffer believes that economic development is a micro-level problem, and they advocate the stimulation of micro-economy through tax cuts. The famous Laffer curve tells people that if the tax rate is too high, for example 100%, the government does not actually receive the tax. Of course, when the tax is zero, the government will not receive the tax. The supply school advocates that tax reductions will give people greater incentives, encourage people to invest more, be more daring to consume, and be more conducive to the efficiency of capital flow. Specific to the survival of small and medium-sized enterprises, for China's small and medium-sized enterprises, the most important role of tax reduction is to help solve the problem of financing difficulties for small and medium-sized enterprises. An important reason for the difficulty of financing SMEs is that banks are reluctant to lend money to SMEs. In fact, banks are enterprises and wholesalers of money. The first consideration for providing money to SMEs is the true reliability of the first source of repayment. The reality is that SMEs are not expected due to rising raw material prices, and the floating cost of wages is difficult to control. The risk assessment is so risky that it does not allow the bank to feel that the source of the first repayment is truly guaranteed, and the difficulty of financing becomes very large. Most of the enterprises that have gone bankrupt in the southeast coast are not able to borrow money and the capital chain is broken. If the tax can be reduced or exempted, then the income expectation will be increased, thus ensuring the stability of the first repayment source of financial institutions and the security of funds. Tax reduction and exemption can increase income expectations, promote effective investment of private capital, effectively promote technological upgrading and transformation of SMEs, invest more effectively in competition, and maintain market equilibrium. The reason why tax cuts have an expansion effect is because taxation is an integral part of the price. Under the premise of price, the amount of tax will directly or indirectly affect the company's disposable profit. The bumps of the tax burden will directly affect the profit rate, thus affecting the enthusiasm of social investment. In the short run, tax cuts can alleviate the financial pressures faced by SMEs, help them struggle to survive, and have a direct impact on fiscal revenue. In the long run, tax cuts can not only help some SMEs. Further development will increase the enthusiasm of social investment, make people more daring to consume, and be more conducive to the efficiency of capital flow, and ultimately will also drive the increase in fiscal revenue. Therefore, tax cuts for SMEs are a long-term solution to the pros and cons.
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