On the afternoon of January 10, Minister of Finance Liu Kun accepted joint interviews with Li Lihui of Peoples Daily, Han Jie of Xinhua News Agency, Sun Yan of CCTV and Zeng Jinhua of Economic Daily on the implementation of the spirit of the Central Economic Work Conference.
Liu Kun said that General Secretary Xi Jinping made an important speech at the Central Economic Work Conference held in December last year, made an in-depth analysis of the current economic situation and fully deployed the economic work in 2019. Premier Li Keqiang has made concrete plans for economic work in 2019. The financial departments should carry out the spirit of the Central Economic Work Conference well. Active fiscal policies should enhance efficiency, implement larger-scale tax reduction and fee reduction, optimize the structure of financial expenditure, improve the efficiency of the use of financial funds, and promote sustainable and healthy economic development and social stability.
The Central Economic Working Conference proposed that active fiscal policies should be enhanced. What are your thoughts on this years active fiscal policy?
Liu Kun: General Secretary Xi Jinping delivered an important speech at the Central Economic Work Conference held in December last year. He made an in-depth analysis of the current economic situation and fully deployed the economic work in 2019. Premier Li Keqiang has made concrete plans for economic work in 2019. I understand that the positive fiscal policy in 2019 should be strengthened to improve its effectiveness. In a brief summary, it is necessary to achieve two enlargements and one improvement.
Two enlargements means increasing the intensity of tax reduction and expenditure reduction. First, we should increase tax cuts and fee reductions. On the one hand, we should implement larger tax cuts, adhere to the combination of inclusive tax cuts and structural tax cuts, focus on reducing the burden of manufacturing and small and micro enterprises, and support the development of real economy. On the other hand, we should promote more obvious fee reduction, clean up and standardize local fee collection projects, and intensify the investigation and treatment of arbitrary fees. Second, increase financial expenditure. According to the economic situation and various expenditure demands, the scale of fiscal expenditure should be moderately expanded. At the same time, the scale of special bonds of local governments has been substantially increased to support the construction of major projects under construction and make-up boards.
One improvement is to improve the allocation efficiency and utilization efficiency of financial funds. To improve the efficiency of financial fund allocation, we should insist on keeping pressure, focus on key areas and weak links, and further adjust and optimize the expenditure structure. The expenditure of this insurance must be guaranteed well, and the investment in poverty alleviation, agriculture, rural areas, structural adjustment, scientific and technological innovation, ecological environmental protection and peoples livelihood should be increased; the expenditure of this reduction must be reduced, the government should live a tight life, vigorously reduce general expenditure, strictly control the budget of three public funds, reduce general expenditure by more than 5%, and cancel inefficient and ineffective expenditure, which should not be spent. Money and finance departments should be iron cocks. To improve the efficiency of the use of financial funds, we should run the budget performance management through the whole process of budget preparation and implementation to better promote the effectiveness of the policy; continue to activate the financial stock funds, and recover all the long-term deposited funds that are difficult to expend, and use them as a whole in areas in urgent need of financial support.
It should be pointed out that the positive fiscal policy should not be a strong stimulus of flood irrigation, but should implement counter-cyclical adjustment, actively adjust and fine-tune, stabilize aggregate demand, and iron out the fluctuation of economic cycle; it is not to break through the bottom line of debt risk, but to balance the relationship between stable growth and risk prevention, and to expand moderately on the basis of strengthening government debt management. The large scale of fiscal expenditure should not be a big package by the government, but should adopt more reform measures, use more market-oriented and legalized means, and work hard in the eight words of consolidation, enhancement, promotion and unimpeded to promote the sustained and healthy development of Chinas economy.
This year, we will implement a larger scale of tax reduction and fee reduction. Can you introduce the policy of tax reduction and fee reduction in 2019?
Liu Kun: Since the Eighteenth National Congress of the Communist Party of China, China has continued to implement the policy of reducing taxes and fees, focusing on the subtraction of government revenue in exchange for the addition of enterprise benefits and the multiplication of market vitality. In 2018, on the basis of implementing the various tax reduction and fee reduction policies established at the beginning of the year, new measures will be introduced in time according to the changes of the economic situation in the middle of the year. We will lower the VAT tax rates for manufacturing, transportation and other industries, refund some enterprisestax credits at the end of the term, expand the scope of small and micro enterprises enjoying preferential tax policies, introduce new tax policies to support R&D and innovation, and promote the reform of personal income tax. It is expected to reduce the burden of market participants by about 1.3 trillion yuan in the whole year. Whether in scale or in proportion to GDP, it will surpass any other country in the world, effectively reducing the burden of real economic costs.
In 2019, the Ministry of Finance will, in accordance with the decision-making and deployment of the Central Committee of the Party and the State Council, fully implement the tax reduction and fee reduction policies already promulgated, at the same time, pay close attention to the study of larger-scale tax reduction and more obvious fee reduction. In formulating the plan, we should adhere to three principles: first, to give prominence to universal benefits; second, to be concise and easy to implement; and third, to put it into effect as soon as possible.
Taking the recent introduction of inclusive tax relief for small and micro enterprises as an example, we have relaxed the criteria for identifying small and micro-profit enterprises, involving 17.98 million enterprises, accounting for more than 95% of the total number of tax-paying enterprises in China, of which 98% are private enterprises. Increasing tax incentives, increasing the starting point for small-scale VAT taxpayers, reducing taxes by half in some local areas, and expanding the scope of application of preferential policies for start-up technology-based enterprises are all measures to directly raise standards, broaden the scope, consolidate and hard-touch. These measures will be implemented from January 1 to enable enterprises to enjoy policy dividends as soon as possible.
In addition, we will deepen the reform of VAT and continue to promote substantial tax reduction. The revised Personal Income Tax Law and its implementing regulations will be fully implemented. Six special additional deduction policies will be implemented to alleviate residentstax burden. At the same time, cooperate with relevant departments, actively study and formulate a comprehensive plan to reduce the social insurance premium rate, and further reduce the burden of social insurance contributions of enterprises.
It is believed that with the gradual landing of larger-scale tax reduction and more obvious tariff reduction policies, it will further stimulate the vitality of market players, boost market confidence and promote high-quality economic development.
What specific measures will be taken this year to improve the efficiency of the use of financial funds?
Liu Kun: Like a family, the government should pay attention to efficiency when it spends money and arranges financial funds. That is to say, it should implement performance management on expenditure. We will further improve the efficiency of the use of financial funds and the quality of public services in accordance with the decision-making of the Nineteenth National Congress of the CPC to implement performance management in an all-round way.
One is to expand the envelope. Promote central departments and local governments to study implementation plans, promote the comprehensive implementation of budget performance management measures to the ground, and extend budget performance management to grass-roots units and fund use terminals. Expanding the pilot scope of overall performance evaluation of central departments and units.
The second is optimization. Organize the central departments and local finance to focus on Revising the budget performance management system, improve the budget performance management methods and processes, establish a sub-industry, sub-field, hierarchical budget performance indicators and standards system, and speed up the construction of budget performance management informatization.
Third, integration. Integrate the performance method into the whole process of budget preparation and implementation, and promote the integration of budget and performance management. We will study and introduce incentive and restraint mechanisms linking performance evaluation results with budgetary arrangements, and promote the reporting of major policies and project performance evaluation results to the peoples congresses at the same level, and make them public to the public.
The Standing Committee of the National Peoples Congress (NPC) recently decided to authorize the State Council to issue in advance a new debt limit for local governments. How is this work going? What measures will the Ministry of Finance take to strengthen the management of issuance and use?
Liu Kun: As you are concerned, the seventh meeting of the Standing Committee of the 13th National Peoples Congress decided to authorize the State Council to issue an additional local government debt limit of 139 trillion yuan in advance in 2019, including 580 billion yuan for general debt and 810 billion yuan for special debt, before the National Peoples Congress approved the local government debt limit in March 2019. At present, these new debt limits have been issued.
At the same time, the Ministry of Finance issues special notices, improves the relevant management system, optimizes the issuance and use process, and requires all localities to do a good job of relevant work.
One is to urge the implementation of legal procedures. The provincial financial departments are required to budget the borrowing of new local government debts according to the new debt quota issued in advance with the approval of the State Council, which shall be implemented by the provincial governments after being submitted to the peoples congresses at the corresponding levels for approval.
Second, we should make good preparations for the project. All localities are urgently required to organize and prepare a number of major projects in urgent need of financial support, especially the half-pull project for construction projects, and urge the regions and departments applying for bond funds to strictly implement project management responsibilities, do well in preparation for projects to be financed in advance, and ensure timely formation of physical workload after issuance of bonds.
Third, we should start issuing debts as soon as possible. Require all localities to start issuing debts in January, some of which do not meet construction conditions in the first quarter, such as Northeast China, can be properly postponed in light of actual conditions. The delay in issuing new bonds will not be allowed to affect the progress of major projects.
Fourth, properly arrange the direction of capital investment. Local governments are required to increase part of the bond funds issued in advance for public welfare capital expenditure in 2019, and to focus on supporting major national strategies, implementing major decision-making and deployment of the Party Central Committee and the State Council on infrastructure, pollution prevention and control, shanty towns transformation in poverty-stricken areas, especially in the three districts, three states and other deep poverty-stricken areas, and promoting major railway projects. Expressway, major water projects, rural revitalization, ecological environmental protection, urban infrastructure, rural infrastructure and other public welfare infrastructure construction.
Fifth, expedite the allocation and use of funds. Local governments are required to speed up the allocation of bond funds, strictly prohibit the retention of funds in the treasury or deposited in departmental units, urge project units and competent departments to implement management responsibilities, timely use of bond funds in projects, give full play to the role of local government bond funds in stable investment, expanding domestic demand and making up shortcomings, and ensure that the decision-making and deployment of the Party Central Committee and the State Council are well implemented and implemented.