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National People'S Congress, Wang Jianjun, Party Secretary And Chairman Of The Shenzhen Stock Exchange, Activate The Stock Incentive System To Stimulate The Vitality Of The Micro Body.

2020/5/26 11:08:00 0

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What is the most expensive in twenty-first Century? Talent! "

As a veteran of the capital market supervision, Wang Jianjun, the NPC deputy and chairman of the Shenzhen stock exchange party committee, deeply touched that he continued to pay attention to the importance of talents to the transformation and development of the economy and the quality of listed companies. At the two sessions this year, he suggested reducing the tax burden of enterprises in the process of implementing equity incentive and stimulating the vitality of micro entities.

In the proposal to reduce the burden of tax incentives for enterprises to implement equity incentive, Wang Jianjun said that under the normalization of epidemic prevention and control, increasing the implementation of equity incentives will help enterprises to stabilize employees, improve quality and efficiency, enhance vitality, improve corporate governance and promote global competitiveness.

The core of equity incentive is to tie up key employees, so that "talents" can turn from passive "executors" to "managers" of company value creation, and get a more sense of belonging and gain, so as to achieve higher value. Since the equity incentive system was launched in the domestic capital market in 2005, the listed companies have followed up actively. Up to now, more than half of Shenzhen listed companies have launched equity incentive programs, totaling more than 2000, involving a total of 260 billion shares of incentive shares.

In the 2017-2019 year, the average annual operating income of Shenzhen Shenzhen Stock Companies in 2016 was 26.05%, which was 5 percentage points higher than that of the companies that did not implement equity incentive in the same period. The average ROE was 7.33%, which was 7 percentage points higher than that of the companies that did not implement equity incentive in the same period.

However, some of the listed companies have doubts about the implementation of equity incentive, and some of them have not yet done enough to try the early implementation. According to the press, tax pressure and institutional constraints are the main factors for their hesitation.

Direct pain point is right then.

A listed company's technical backbone admitted: "in early 2018, I acquired 800 thousand restricted shares. In early 2019, 200 thousand shares were lifted. When the market price was lower than the cost, the sale was sure to lose money and had to be kept. But since the stock price in early 2018 was higher than the price I bought for the restricted stock, I still need to pay a high tax in early 2019, when the pressure was not too great.

In this regard, during the two sessions of the National People's Congress in 2019, Wang Jianjun put forward the trend of "complying with the comprehensive levy of personal income tax", allowing the object of long-term shareholding incentive to transfer the daily selling price as the tax price basis, calculating the taxable income to apply 20% tax rate, and paying personal income tax.

In recent years, the two level market shock adjustment, the listed companies in the implementation of equity incentive tax burden is increasingly prominent.

In addition to employees' tax mismatch pressure, the performance of tax burden is slightly more complicated at the corporate level. According to statistics, since the implementation of equity incentive in the third years after implementation, the median annual growth rate of the A share tax rate of listed companies with equity incentive has been 22%, 17% and 11% respectively, compared with the tax growth rate of the same period in the company's industry, the median of the difference is 12%, 8% and 2% respectively.

It can be seen that the income tax paid by companies implementing equity incentive is obviously higher than the industry level, and the first year of implementing equity incentive is most obvious.

According to the reporter, one of the reasons for this situation is that the shares of equity incentive are generally set to lock in period, and the unaccounted for shares can not be used to deduct enterprise income tax immediately.

"Enterprises want to issue a total stock incentive of 10 million yuan. If the 2 year lock up period and the subsequent 3 year batch batch are unlocked, the accounting fees charged in the 2 years without shares unlock will be about 5800000 yuan. It will be third years, fourth years and fifth years before the cancellation of the shares can be used to deduct the tax payable. If a longer lock period is established, this mismatch problem will become more prominent, and the enterprise will weigh it when setting the lock period. An agency engaged in equity incentive services for many years said.

Of course, the problem of tax burden is more prominent when equity incentive is terminated.

According to the accounting standards, enterprises should terminate the equity incentive when the remaining costs involved in the one-time confirmation incentive plan can be speeded up. However, because the incentive object does not acquire shares and does not conform to the real tax principle requirements, the corresponding costs can not be used for pre tax deduction. In practice, the requirement of "punitive" accounting treatment for the termination of equity incentive and the residual cost involved in one-time incentive plan is always difficult to obtain the recognition of market participants.

On the other hand, the limited flexibility of the system and the disincentive of incentives are also the main reasons why many listed companies are deterred.

With the increasing diversification of the demand of listed companies, the problems faced by equity incentive in practice also gradually appear. For example, the total amount of equity incentive should not exceed the 10% threshold value of the total share capital of the company, which is too low to cause inconvenience to the design incentive scheme; the procedures for changing and terminating the incentive plan, phasing assessment, granting, unlocking, and capital stock change registration are relatively cumbersome, which is not conducive to the implementation of the company; the cold period after the termination of equity incentive is too long for three months, which can not meet the needs of the company to launch the new plan quickly. The restriction of incentive objects excludes the managers of listed parent companies in the group from the incentives of listed subsidiaries, which can not meet the overall balance incentive mechanism within the group.

It is worth mentioning that the recent gem reform and pilot registration system have completed the rules for soliciting opinions, among which equity incentive system reform is one of the key points, and it is expected to solve the problems of incentive ratio, incentive targets, awarding price and implementation procedures.

Institutional flexibility

Good equity incentive is conducive to enhancing the attractiveness of enterprises to talents. Under the mechanism of equity incentive, "sharing interests and risk sharing", enterprises and employees jointly make big cake, alleviate the pressure of cash flow and fully mobilize the enthusiasm of all parties, which will bring a higher overall wealth effect to the society. As the curtain of capital market reform continues to spread, the call for optimizing equity incentive rules is becoming more and more intense.

At present, the implementation of equity incentive companies has become an important force in China's tax contribution. For example, the computer application industry with the implementation rate of equity incentive reaches 63.74%, the average income of each computer application industry company in 2018 is 33 million 250 thousand yuan, while the average company pays 17 million 120 thousand yuan on average, but the former pays almost two times the latter.

In the two sessions of this year, Wang Jianjun once again put forward from the perspective of the implementation of equity incentive for enterprises: "allowing the listed companies to pay the enterprise income tax on the basis of the expenses incurred by the listed companies after the annual deduction of the incentive plan, and make a settlement of the difference between the market price and the exercise price at the time of the actual implementation of the incentive plan after the implementation of the incentive plan is completed." This will move forward the time of tax deductible expenses of listed companies, and lighten the tax burden without reducing the total amount of tax paid by listed companies.

On the other hand, some market participants suggested that the system should be given flexibility. Some senior investment bankers pointed out: "we should consider loosening the system of equity incentive and increasing the flexibility of the system. For example, the total amount of equity incentive to all listed companies increased to no more than 20% of the total share capital; further streamlined the relevant process of the company's implementation of the incentive process; moderately relaxed the window period limits granted to the rights and interests, and encouraged the identity restriction of the object; abolished the cold period of the incentive plan after the termination of the previous plan. This will lay a good foundation for equity incentive in the overall spread of the A share market, and help to mobilize the enthusiasm of enterprises to achieve the annual economic goals.

Of course, in the view of the industry, we should really play the role of the "golden handcuffs" of equity incentive, make good use of the stock incentive, and also need to tighten up the "compliance chord" of the superiors, establish "honesty" in the market, take "trust" in the staff, and effectively serve the enterprises in the field.

(author: Southern finance and Economics National two sessions report group Yang Ping)

 

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