The case

China has recently unveiled significant tax reform plans aimed at addressing the financial difficulties faced by local governments.

Source: South China Morning Post – Autor Cedric Zhao, Hong Kong

The commentary

During the third plenum in Beijing, officials emphasized the need to improve the financial relationship between central and local governments. Han Wenxiu, Deputy Director of the Office of the Central Financial and Economic Affairs Commission, stated that these reforms would increase local governments’ fiscal capacity and expand their tax sources.

The reforms focus on enhancing local governments’ autonomy in generating revenue, expanding the tax base to include new economic sectors, improving the allocation of financial resources in order to lower levels of local government as well as addressing spending needs by appropriately increasing the central government’s fiscal responsibilities.

These tax reforms could positively impact European and Swiss companies operating in China by creating a more stable investment climate. Swiss firms could benefit from predictable tax policies and improved local government financial stability, enhancing their business prospects in China. Additionally, the reforms may boost the competitiveness of Chinese companies, increasing demand for Swiss technology and expertise, particularly in innovative sectors like renewable energy and advanced manufacturing.

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