Tax exemptions improve IT industry’s revenues in China
Business tax exemptions granted to the IT industry in 21 cities of China till 2014 has resulted in the continuous and fast growth of this sector in this Communist country. A recent report released by the Ministry of Industry in China said that the IT and ITeS industry in the country had posted revenue worth 723.1 billion yuan or $106 billion during in the first seven months of 2010. The revenue earned by this sector in between January and July 2010 was up by 29 per cent in comparison to the earnings during the corresponding period in 2009.
Quoting the Chinese Ministry of Industry report, a news website says that only in July 2010, the software industry in China earned revenue to the tune of 118.3 billion yuan or $17.3 billion – an enhancement of 28.5 per cent more than the revenue earned during same period in 2009.
It may be noted here that with a view to encourage the country’s IT industry and help it to compete with neighboring India, arguably the leader in this field, the Finance Ministry in China had on July 1, 2010 announced exemption of five per cent business tax for the outsourcing firms. The tax exemption has been extended till the end of 2013 starting. The tax exemption is being enjoyed by Chinese firms engages in business process outsourcing (BPO), information technology outsourcing (ITO) and knowledge process outsourcing (KPO) in 21 cities of the country.
The ministry report further stated that the revenue earned by the Chinese software design and development firms during the first seven months of the current year stood at 40.7 billion yuan or $5.9 billion – an annual rise of 78.1 per cent. At the same time, the IT consulting services vendors in the country earned revenues worth 72.6 billion yuan or $10.6 billion, an increase of 36 per cent from the previous year. Earnings from software products comprised 35 per cent of the entire revenue of the industry and increased to 251 billion yuan or $36.8 billion – a rise of 23.5 per cent from the previous year.
In fact, the revenues earned by the Chinese software industry had touched a peak of 997 billion yuan or $146 billion in 2009, an increase of 25.6 per cent in comparison to its earnings in 2008. Overall, the Chinese software industry actually witnessed a 16-fold growth in earnings since 2000.
Meanwhile, a report made available by global audit firm KPMG recently said that China surpassed India as the favored destination for outsourcing as well as shared services for the business in the Asia-Pacific region. Incidentally, the US President Barak Obama has recently announced that America was becoming highly competitive and assured that no further jobs would be outsourced to inexpensive destinations like India, China or Germany.