Tax incentives and subsidies are a powerful tool for local governments to attract investment, especially for underdeveloped areas.
Judging from the trend in the past few years, many enterprises in Guangdong have invested in the central and western regions, on the one hand, because the land and labor costs in the north are much lower than those in the south, and on the other hand, they are in charge of preferential policies.
Recently, many local governments have received a notice from the higher authorities, requiring all localities to clean up the long-term preferential tax measures for enterprises in attracting investment, no longer promise new incentives and subsidy policies, and the implementation of those that have been promised in the past must also be suspended.
A notice, local governments and enterprises are confused.
Before there were a number of paint enterprises, relocated to the central and western regions is also fancy all kinds of local tax depressions: "three exemptions and three halves", land discounts, tax-related incentives and subsidies preferential policies to settle in, and even some enterprises are completely dependent on tax rebates in life.
Now the superiors have suddenly asked all localities to suspend tax subsidies, which makes the enterprises that attract investment to settle in very stunned.
What was the cost advantage turned into a disadvantage?
01
Cleanup begins
On January 30, Jiangsu Boqian New Materials Co., Ltd. (605376. SH, hereinafter referred to as "Boqian New Materials") issued the "Announcement on the Return of Government Subsidies", according to the "Announcement on the Return of Government Subsidies", in 2023, the company will receive two incentive funds totaling 24 million yuan from the Finance Bureau of Suqian High-tech Development Zone.
According to the announcement, the company recently received the "Notice of Return of Rewards" from the Management Committee of Suqian High-tech Development Zone, and because it does not comply with relevant policies, in order to standardize financial expenditures, the company should remit the above two reward funds to its designated account before February 29, 2024.
Previously, some local governments had also suspended the company's award and subsidy funds because of the audit department's audit. "After we explained the tax inversion problem encountered by the company, some of the special offices of the Audit Commission expressed their understanding, while others did not understand and demanded rectification. The person in charge of a company said.
"What we are facing now is that 20 percent of local governments admit their accounts but do not give incentives and subsidies, and 60 percent of local governments have a wait-and-see attitude towards policy implementation, but they do not give incentives and subsidies. However, we believe that some of these local governments are using policies as an excuse, and the essential reason is that they are financially constrained. The person in charge of the above-mentioned enterprise said that in the face of the current situation, some local governments have changed their names and subsidized enterprises in a way that is not directly related to taxes.
Some local responsible persons said that the "tax depression" needs to be standardized, but the assessment indicators have not changed, and the projects with large investment quotas can only be "discussed on a case-by-case basis" and handed over to the higher-level departments for decision.
02
Whether it is cost-effective to relocate
Under the policy of "strengthening provincial capitals" in various places, underdeveloped cities, especially some small and medium-sized cities, are facing tremendous pressure to attract investment.
Finishing business information understands that the area where the person in charge of the China Merchants Bureau is located attaches great importance to the task of attracting investment. Every year, all districts and counties in the city will rank the task of attracting investment, and announce it once a month, and the top of the ranking will be given to the small red flag, and the bottom will be given to the small yellow flag, the yellow flag means a warning, and the person who gets the small yellow flag will also make a statement.
In 2023, an incentive policy for investment promotion and support in a certain place shows that "indicators such as project investment scale, benefit output, and tax contribution must be agreed in the contract as the basis for the payment policy." For newly introduced land acquisition industrial projects, 100% of the project's contribution to local finance will be subsidized to enterprises in the first three years for the first three years after the project is put into operation. In the fourth and fifth years, 50% of the project's contribution to local finance will be subsidized to enterprises every year. ”
In addition, for the newly introduced headquarters economic projects such as headquarters institutions, regional functional institutions and headquarters economic enterprises, the policy requires that from the date of tax payment, the local government will reward the enterprise for a period of 5 years: according to the amount of annual industrial and commercial tax paid, 50%, 60% and 80% of the enterprise's contribution to the local finance will be rewarded.
Now the rumors have begun to worry the locality. What is the direction of this suspension of tax refunds?
If the government moves flowers and trees, it is easy for new "depressions" to emerge in the name of clever projects, and "we are eager to know what kind of policy guidance the higher-level government departments are, and whether the whole country will be 'leveled.'" A person in charge of attracting investment expressed concern.
Competing local governments are keeping an eye on policy changes. When communicating with the enterprise, the person in charge of investment promotion will frankly inform that some policies have been suspended and will wait for the introduction of higher-level policies, but he will also tell the enterprise that although the current commitment is less, it will be more than the commitment in the actual operation in the future.
For enterprises, it is necessary to reconsider the question of whether it is cost-effective.
Take a listed company to settle in Sichuan, for example, there were preferential policies to save 60%-70% of the comprehensive tax burden, but now everything is tightened and the return is less. However, the remote location of Sichuan leads to the same cost of transportation and other costs, which cannot be reduced, and the final calculation is a big loss.
It is likely that the relocated enterprises will be forced to return to Guangdong. Especially in the building materials industry, pay special attention to cost control, the timeliness of the supply chain, if there is no advantage in the central and western regions, then it is a good choice to move back to Guangdong.
03
Establish a unified market
Why is it necessary to suspend the "tax rebate" policy in various places now?
There are two reasons: on the one hand, there is no money in the local government, and on the other hand, it is necessary to establish a unified market.
Since last year, the promotion of the unified market has been markedly accelerated, and the State Council has launched several rounds of "number one" briefings on local market segmentation and vicious competition in attracting investment.
At the beginning of this year, the higher-level audit work conference directly and sternly pointed out that the local investment promotion violated the rules to introduce "small policies" and formed "tax depressions", and other problems, and it is necessary to seriously investigate and deal with the chaos of illegal tax refunds.
Now the meaning is obvious: the local government has disrupted the economic order through "small means" and directly started to put things in order.
The tightening of a series of investment promotion measures will undoubtedly have a huge impact.
For less developed regions, the tightening of policies may discourage some companies:
First of all, without preferential tax policies, it will be more difficult for the central and western regions, especially the underdeveloped areas, to recruit enterprises to settle in, and the local economy and finances will face challenges.
Secondly, the most effective means of attracting investment has been lost, but the task indicators of attracting investment are still immovable. For example, Tibet has further relaxed the quota for college entrance examination registration to attract investment; for example, the three prefectures and cities in Sichuan have used joint enclave investment to attract investment; and in some localities, the most grassroots cadres have to attract investment from the localities.
Further, now that the market is already very volatile, whether enterprises can successfully get subsidies is related to the normal operation of enterprises.
But for the whole country, these measures will deepen the layout of the unified market and weaken local protectionism.
To put it simply, the central and western regions used to rely on preferential policies to attract enterprises to settle in to get more financial revenue, but now the advantages of investment promotion policies have been broken, and the central and western regions have lost their comparative advantages.
In the short term, if the government subsidy is lost, some paint companies will face the dilemma of loss.
In the long run, the abolition of local "tax rebates" is a real survival of the fittest, and it is also a powerful action to weaken local protectionism.