Quick tax refunds key to companies' liquidity, experts say

Since the timetable for this year's value-added tax credit refund program was announced, many businesses have been looking forward to receiving payments. Analysts expect that money from the refunds will help businesses, particularly smaller ones, not only survive, but also thrive.

The Ministry of Finance said in an explanatory note accompanying the timetable that the VAT credit refund program has been gradually implemented since 2019, and that this year, greater effort is being made to improve the system and the refund process so that going forward, taxpayers will receive refunds more quickly.

According to the circular, outstanding VAT credits will be refunded to micro and small businesses in one lump sum by the end of June, with micro enterprises receiving their refunds this month and smaller enterprises in May and June. Newly added credits will be fully refunded on a monthly basis from April 1.

Su Jingchun, an associate professor at the Chinese Academy of Fiscal Sciences, said that the key to refunds is that they help generate liquidity.

The requirement to refund outstanding credits shows that the central government is resolved to help businesses overcome their difficulties, she noted.

Meanwhile, the refunds are critical to those waiting for them, some business leaders said.

Liu Yongfang, head of a manufacturing business that mainly produces plastic models in Sichuan province, said her company has been dealing with liquidity issues for the past two years.

She noted that her company's factory requires the use of a great deal of resources during the early stages of production. The company usually uses its refunds, which come from previous sales, to fund these operations. However, over the past two years, due to the effects of COVID-19, sales have declined notably, impacting the amount they can receive as a refund.

"The refund policies have helped us to shorten the process of receiving outstanding refunds, which is very important money during this difficult time," she said, adding that as the company was founded in 2017, its annual VAT credit refund has amounted to more than 200 million yuan in recent years.

Meanwhile, the Ministry of Finance has worked to assist local governments with ensuring the better operation of the scheme.

A slew of measures have been rolled out to increase and advance transfer payments that can be used by local governments to help pay refunds.

Xu Hongcai, vice-minister of finance, told a recent news conference that this year, central government transfer payments to local governments will increase by 18 percent to reach nearly 9.8 trillion yuan ($1.54 trillion).

The first batch of transfer payments to support refunds for micro and small businesses, worth 400 billion yuan, were made on March 21.