Tax breaks aimed at helping service sector

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Xie said that a preferential tax policy will also be implemented to help some small and medium-sized enterprises that have low profits, and the policy will aid industries involved in conserving energy, reducing emissions, protecting the environment and creating new jobs.

But the country will face more fiscal pressure in 2011, partly due to planned taxation reforms, because revenue growth is likely to slow and spending is set to remain high, said the ministry in the government's annual budget report delivered to the NPC on March 5.

"Fiscally, there is still a significant imbalance between our revenue and expenditures Revenue will decrease somewhat because of the higher basis in 2010, unsustainable growth in imports and exports, the cooling automobile market and the ongoing tax reform," it said.

The government has reduced its planned deficit to 900 billion yuan ($137 billion), 150 billion less than that of 2010, and lowered the deficit ratio against GDP from 2.5 percent last year to no more than 2 percent.

"Higher investment in agricultural and water conservancy infrastructure, support for the reforms of education, healthcare and social security, and increasing subsidies to low-income people will all put considerable pressure on expenditures," said the ministry.

China will also give provincial-level governments the power to adjust local tax categories, rates, and cuts in the next five years to ensure their fiscal revenues in accord with administrative responsibilities, and put all kinds of government revenue into budget management for better control of actual fiscal conditions, said Xie.

Li Yang, deputy head of the Chinese Academy of Social Sciences, said it's time to change the fiscal system completely because the old framework can no longer adjust to rapid economic growth and solve emerging problems. The current frame of China's finance and tax system was set up in 1994.

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