State set to extend tax breaks

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Last updated at: (Beijing Time) Wednesday, December 03, 2003

State set to extend tax breaks

The central government will extend a series of tax breaks offered to airlines, travel agencies and tourism-related companies until the end of the year, the central government announced yesterday.

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The central government will extend a series of tax breaks offered to airlines, travel agencies and tourism-related companies until the end of the year, the central government announced yesterday.

The tax breaks, which were put in place in May following the SARS outbreak that ravaged the travel and tourism sector, were scheduled to end on September 30.

The ministry of Finance and the State Administration of Taxation jointly issued a circular about the new policy last Friday, which was posted yesterday on the Website of the country's tourism administration.

While the government didn't say why it is extending the policy, industry officials said the sectors are still struggling to recover from the SARS outbreak.

"The waived taxes will not be a huge sum, but they will definitely be helpful," said Li Huaifa, deputy general manager of Shanghai China Travel Service.

"Inbound tourism is still weak, and we need more solid help such as better discounts on air fares to attract foreigners," said Wu Shilin of Shanghai Airlines International Tours Co Ltd.

Wu said domestic and outbound tourism have almost completely recovered from the outbreak of the deadly virus, but inbound tourism is still down 70 percent from the same period last year.

Between may and September, the Shanghai government returned about 80 million yuan (US$9.6 million) to travel agencies, hotels, restaurants, airlines, railways and cruise ship owners, as well as some tourism spots, according to Zhu Jinling, an official with the Shanghai Municipal Tourism Administrative Commission.

Zhu said the tourism commission will meet with the Shanghai Finance and Taxation Bureau to discuss how to return taxes that have already been paid and which sectors still deserve tax breaks.

"For example, most of the hotels are doing prosperous business. We need to further discuss whether they should be included in the extended tax-return program," said Zhu.

Officials in the aviation industry said the extended tax breaks could help domestic airlines break even for the year, despite still posting huge losses in September.

"The preferential financial policies will be a major help for domestic carriers to show a better whole-year performance," said Zhu Anping, an industry analyst with Shenyin & Wanguo Research and Consulting Co Ltd. "With the government's aid, airlines may be able to break even by the year's end."

The policy announced in May excluded airlines from paying aviation construction fees, which are collected by the government to cover the cost of domestic aviation infrastructure, as well as business taxes.

The two fees account for around 8 percent of an air carrier's total revenue, according to analysts.

"China's airline companies are operating under very small profits. The two financial items are even more than their net earnings during the past years," said Zhu.

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