Tax cuts in China by next year could reach more than 1% of GDP, a central bank adviser said in a statement released on Monday stating that policymakers may consider a new deal of tax cuts.
Beijing has promised to pursue a more proactive fiscal policy to support the world’s fastest growing second economy, at the slowest pace since the global financial crisis, as a campaign to reduce debt risk and trade war with the United States.
Next year’s tax cuts are expected to be at or above 1% of GDP, said Ma Jun, political advisor at the People’s Bank of China (PBOC), according to the financial magazine, Caixin.
China’s GDP reached 82.7 Billion yuan last year which is around $11.93 billion. A tax cut of 1% of GDP next year would be at least 827 Billion yuan.
Ma’s forecast comes on top of the tax cuts of at least 1.3 Trillion yuan, estimated by Beijing for this year. Finance Minister Liu Kun said in September that supervisors are studying tax cuts on an even larger scale.
In the interview, Ma also said that cuts next year are likely to be larger than US tax cuts.
In December 2017, US President Donald Trump signed a $1.5 Trillion tax bill, reducing the tax rate and giving the US taxpayers temporary tax relief majorly the middle class.
On Saturday, Beijing issued a draft of the new tax-deduction rules as part of a major overhaul of the country’s income tax law. The proposal presents a deduction of RMB 1,000 per month for interest payments on residential mortgages and from 800 to 1,200 yuan per month for rent.
In addition, Stock market chaos and a slower-than-expected economic slowdown are putting surplus stress on Chinese leaders as Donald Trump does the same.