Research On The Tax Cuts Policies To Promote Employment Of SMEs In China

In order to promote employment,the State Council issued the "14th Five-Year Plan for Employment Promotion" in 2021,which emphasized the need to continue to reduce the burden on small,medium and micro enterprises and individual industrial and commercial households and comprehensively enhance their employment absorption capacity.China is in the development stage of a profound restructuring of its economic structure,there is a contradiction between labor supply and demand,and the employment situation is complex and serious.In addition,the COVID-19 outbreak has taken a further hit to employment.As one of the important forces in China’s economic development,SMEs play an important role in absorbing labor employment.According to statistics,the number of SMEs registered in industry and commerce in China accounts for 99% of the total number of enterprises,and these SMEs can provide more than 80% of urban employment.However,for a long time,SMEs have been hindered from developing and growing to a certain extent due to the deficiencies in many aspects such as capital,scale and management.The Chinese government has always attached great importance to the development of SMEs and full employment.In recent years,various policies and measures have been introduced to support the development of SMEs in order to absorb employment.Among them,the tax reduction policy is an important measure.The tax reduction policy to promote employment for SMEs in China has reached specific results,but there are still some problems that require further improvement.Hence,it is of great significance to study the tax reduction policy to promote employment for SMEs in China.Firstly,we analyse the mechanism of tax cuts policies affecting labour demand from the perspective of the Keynesian theory of employment and the supply theory of employment,and from the perspective of labour demand.On the one hand,tax cuts policies will affect the quantity of labour demand,and taxation on goods and income will have different effects,mainly depending on the size of the substitution effect and income effect.On the other hand,tax cuts policies will affect the structure of labour demand,mainly in the form of tax cuts policies affecting the adjustment of industrial structure,which in turn will lead to changes in the structure of labour demand.Secondly,this article analyzes the current situation of SME development in China and the current situation of employment absorption.It turns out that the development of SMEs is not yet encouraging,but SMEs have provided a large number of jobs for the society and made a significant contribution to employment absorption.Then,it sorts out the tax cuts policies currently implemented to promote the employment of SMEs in China.It has been 14 years since the tax reduction policy was implemented in 2008.Among them,value added tax and corporate income tax have the greatest impact on SMEs.It also mainly studies these tax cuts policies.After that,this thesis conducts an empirical analysis of the effects of the policies on tax reduction and fee reduction to promote the employment of SMEs in China.Then,using the empirical data of listed companies on the SME board from 2013 to 2020,an empirical analysis was conducted on the effect of tax and fee reduction policies that promoted employment for SMEs in China.It shows that tax cuts can promote SMEs to absorb employment.Further research finds that,compared with income tax,the tax burden on turnover has a significant negative impact on employment in SMEs.Based on the policy combing and the empirical analysis,it is found that there are a series of problems with the tax cuts policies that promote the employment absorption of SMEs in China,specifically,the legal level of tax and fee reduction policies is low and not stable;the tax reduction and fee reduction policy is weakly oriented and lacks targeting;the coverage of the tax reduction and fee reduction policy is too narrow and the concessions are insufficient;the tax reduction and fee reduction policy has a single form of concessions and lacks flexibility;the threshold for enjoying the tax reduction and fee reduction policy is high and operability is poor.Then,in order to better realize the role of tax cuts policies in promoting SMEs to absorb employment,this thesis sorts out the tax cuts policies of the United States,Japan and South Korea to promote employment absorption by SMEs,and proposes tax cuts policies to promote employment absorption by SMEs in China.Tax policies can be used for reference,including:implementing a lower corporate income tax rate;adopting a flexible form of tax reduction;focusing on supporting the development of SMEs.Finally,on the basis of the above,suggestions for optimising tax cuts policies to promote employment absorption by SMEs in China are put forward,specifically including: improving the long-term and systematic nature of tax cuts policies;strengthening the orientation of tax cuts policies;increasing the benefits of tax cuts policies;enriching the forms of benefits of tax cuts policies;lowering the threshold for enjoying tax cuts policies.