SARS-affected Companies to Get Relief

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Last updated at: (Beijing Time) Tuesday, May 13, 2003

SARS-affected Companies to Get Relief

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A tax relief package for hotels, airlines, travel agencies and several other industries damaged by SARS is receiving mixed reactions, with all the businesses praising the move but some questioning if it will be enough to keep smaller companies from going under.

The rescue package, which was announced by the Ministry of Finance on Sunday, will abolish or reduce many taxes and fees for hard-hit industries from May 1 to September 30 and is expected to save businesses millions of yuan.

The measures have been hailed by those who are still staying in business, but means little to companies that are already out of business or are on the verge of doing so.

Even large companies in the worst-hit sectors say that they still don't expect to post a profit this year due to SARS.

While some hotels around the city have suspended operation or partially closed, Shanghai Hengshan Group Corporation, owner of seven hotels and 700 taxies in Shanghai, is pushing ahead with normal operations.

"We did all we can to keep the business running as usual," said Huang Tiemin, the group's vice president.

"The rescue measures are really a timely help," Huang said.

He added that one of the group's hotels had an occupancy rate of 40 percent on Sunday, a horrible number by normal standards but much higher than the city's current average occupancy rate.

For airlines, the tax break will mean savings of about 3 percent of total revenue.

"Taxes are levied by the local govern-ment where a company is registered, so we're now contacting provincial tax bureaus nationwide to find out the details," said Luo Zhuping, board secretary for China Eastern Airlines Co Ltd, one of the country's three major carriers.

The measure also removes civil aviation construction fees, an administration fee equal to 5 percent of an airline's domestic revenue and 2 percent of its international turnover.

"Together, it's a fairly big sum of money for domestic carriers to ease their burdens during this hard time," said Zhu Anping, an analyst with Shenyin & Wanguo Research and Consulting Co Ltd. "However, I think they are unlikely to escape the fate of losing money by the end of the year."

In the meantime, carriers are trying to survive cutting operation costs.

China Eastern said it has reduced its payroll by between 20 and 30 percent on average, in a bid to control internal costs "but it will not help a lot since payroll expenses usually account for only 8 percent of costs for domestic carriers," said Luo.

Taxi operators will be spared 350 yuan per month of tax for each cab and cabbies will be subsidized 200 yuan each, 20 percent of the road maintenance fees taxi operators have to submit every month.

"The rescue package of 550 yuan a cab every month does help us to some extent," said Gu Hua, board secretary of Dazhong Transportation (Group) Co Ltd, one of the city's leading taxi operators.

But the government has called on cab companies to guarantee each driver a minimum monthly income of 1,800 yuan during the SARS scare, which could potentially cost them a fortune.

For some travel companies, the tax breaks mean little as they have almost no income at the moment.

"The measures give little help to us," said Li Junhua, president of the Shanghai Dazhong International Travel Service. "We have no travel business to do now, so the income tax exemptions means nothing to us."

Many of the city's hotels have decided to suspend business. China's largest hotel management company - Jin Jiang International Management Corporation - started to "renovate facilities" in 14 of its 17 hotels in Shanghai, including the Peace Hotel on the Bund and the Hua Ting Hotel and Towers in Xuhui District. The renovation will take three months.

The situation for small hoteliers is worse.

"We can't afford the daily expenses any more. The room occupancy fell down to less than 10 percent, so we will stop our business on Wednesday," said Yan Tinglong, owner of a 40-room hostel. "The three tax exemptions are unfortunately not helpful to us. We need more substantial measures such as subsidies from the government to our staff."

Source: Shanghai Daily News

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