Core reminder: 2016 can be said to be the most difficult year for paint companies. On the one hand, some markets tend to be saturated, making it difficult for paint product sales to increase significantly; On the other hand, raw material prices continue to rise
2016 can be said to be the most difficult year for paint companies. On the one hand, some markets tend to be saturated, making it difficult for paint product sales to increase significantly; On the other hand, the soaring prices of raw materials have put a lot of pressure on many coating companies. The decline of the Chinese economy seems to have put heavy handcuffs and shackles on paint companies, making it difficult to move forward. In October, the Chinese government launched the strictest real estate regulation policy, directly affecting the severe weakness of over 80 related industries, and implicated paint companies. Under the heavy burden of multiple parties, the "death tax rate" undoubtedly exacerbates the situation for paint companies.
The actual tax burden rate of Chinese enterprises is close to 40%. What does a 40% or 30% tax burden mean for enterprises? It means death, or it can be called the 'death tax rate'. Because in China, except for emerging industries and finance, most companies have profit margins of less than 10% or 30%? A 40% tax burden can cause some enterprises to be in a difficult situation. Especially for coating companies this year, the increase in raw materials and transportation costs has led to a significant increase in costs, while product prices are difficult to rise. The huge tax rate may be the last straw that will overwhelm coating companies.
In the past few years, when it comes to China's macro tax burden, although relevant departments have repeatedly proven with their own formulas that China's macro tax burden is not high, in fact, if we truly unify the caliber, seek truth from facts, and calculate all tax burdens, China's macro tax burden would have already caught up with the UK and surpassed the US. Most responsible scholars agree that China's macro tax burden should be between 37% and 40%, while the current macro tax burden in the United States is less than 30%. Many years ago, the research results of the World Bank showed that developing and developed countries have different "optimal macro tax burden levels". According to the World Bank's conclusion, the optimal macro tax burden level for low-income countries is around 13%; About 20% in lower middle income countries; About 23% of middle and upper income countries; About 30% in high-income countries.
On January 26, 2015, the Ministry of Finance of the People's Republic of China and the State Taxation Administration issued the "Notice on the Levy of Consumption Tax on Paints". The "Notice" requires that consumption tax be levied on coatings from February 1, 2015, and the applicable tax rate is 4%. At that time, the owner of a paint company with sales exceeding one billion said, "The net profit of the paint company is only a few points. If a consumption tax of 4% is imposed, it will be difficult for the company to make a profit." The owner said that if all companies are taxed the same, everyone can still accept it. The problem is that taxation will be levied based on the sales revenue including tax of the enterprise, and large-scale paint companies must issue invoices, which naturally leads to higher taxes. Many small businesses originally rarely issue invoices, so the impact of consumption tax on them is not significant. This actually suppresses large-scale formal coating enterprises and encourages the brutal growth of non-standard enterprises.
As a low-income country, China's macro tax burden has already surpassed many high-income countries. Under such a high tax burden, it is not easy for enterprises to survive, especially in today's overall economic downturn and sluggish market. In 2011, a research report from the National Research Institute of Peking University showed that due to nearly half of the profits being embezzled by taxes and fees, 72.45% of small and medium-sized enterprises in the Jiangsu and Zhejiang regions were expected to have no profits or slight losses in the next six months, and had low confidence in operating in the next six months; 3.29% is expected to experience significant losses or close down in the next 6 months, and is pessimistic about future operations. In the context of declining profits and heavy tax burdens, some small and medium-sized enterprises can only give up their industries, while those who reluctantly persist in doing so mostly rely on tax evasion to survive. Some businesses are able to survive, indeed, by evading taxes.
A corporate tax director stated that out of the company's nearly 3 billion yuan tax revenue, the value-added tax (tax rate of 17%) and corporate income tax (tax rate of 25%) have exceeded 2 billion yuan, accounting for nearly 80% of the company's total tax revenue.
Not only do large and medium-sized enterprises feel that the tax burden is heavy, but small and micro enterprises also feel that the tax burden is not light. A small enterprise in Zhejiang Province with a sales volume of about 20 million yuan has listed a tax bill. The bill shows that the total tax paid in 2015 was about 550000 yuan, including 216000 yuan of value-added tax, 34000 yuan of property tax, 138000 yuan of land use tax, 101000 yuan of social security fees, and about 52000 yuan of other Surtax, including water conservancy fees and urban construction fees.
Taxation is an important means for the government to intervene in the economy, but it is not the only means or a universal tool, and different types of taxes have different functional characteristics and focus of action. Tax measures cannot replace the functional role of other policy tools in regulating the development of the paint industry. It is necessary to choose tax policy tools based on objective needs, not only to grasp the coordination and cooperation between tax and other policy measures, but also to avoid conflicts between the regulatory effects of various tax categories, and strive to achieve the best combination effect with the best policy combination. The person in charge of a paint company said, "It is already difficult to do business in the market now. I managed to earn some money and paid taxes. In the situation where the market is declining and costs are rising, the government should reduce taxes and avoid further increasing the burden on enterprises, which will lead to a greater wave of bankruptcy in the paint industry.