英闻天下——515 China to Expand Value Added Tax Reform

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　　Experts say the expansion sends a signal that the government is speeding up fiscal² reform, which is intended to further boost business vitality³; help enterprises find new growth; and increase employment and residents' income to promote sustainable and healthy development.

 

　　Wang Xiao has more.

 

　　From August 1, the reform, replacing turnover⁴ tax with a value-added tax, or VAT⁵, in transport and some service sectors⁷, will spread to the whole country from the current 12 provinces and municipalities, according to a statement issued by the State Council. Film, radio and television industries will be included in the pilot reform.

 

　　Liu Shangxi, deputy director of the Research Institute for Fiscal Science under the Finance Ministry⁸, says the expansion is a vital step in fiscal reform.

 

　　"Originally, we implemented⁹ tax reform in certain areas, but now we are doing it according to industries. It's a big step forward. After the VAT reform is fully¹⁰ completed, turnover tax will be consigned¹¹ to history."

 

　　Turnover tax refers to a levy¹² on the gross revenue of a business. VAT refers to a tax levied¹³ on the difference between a commodity's price before taxes and its cost of production.

 

　　Zhu Qing, the chairman of the academic committee of the School of Finance, at the Renmin University of China, says the reform can help the company avoid duplicated taxation¹⁴ and benefit from a lower tax burden.

 

　　"This is not only a reform of the fiscal and taxation system, but an improvement in the circulation tax system. It also helps to further adjust the industrial structure and increase employment opportunities. Right now the central government is striving to develop the service sector⁶ in an effort to create more jobs."

 

　　China introduced the reform in Shanghai last year to avoid double taxation. It was later expanded to another 11 regions, including Beijing, Tianjin and Shenzhen.

 

　　By February 1, the program helped more than 1 million taxpayers¹⁵ save over 40 billion yuan in tax.

 

　　It is estimated that the widening reform will reduce tax burdens by about 120 billion yuan this year.

 

　　The government will extend the reform in due time to cover railway transport, postal¹⁶ services and telecommunications industries. It will strive to complete the reform by the end of 2015.

 

　　Liu Shangxi, deputy director of the Research Institute for Fiscal Science, says the reform has a long term positive impact.

 

　　"This reform can stabilize¹⁷ the Chinese economy and ensure continued growth. Continued growth relies heavily on a sound industrial structure. The tax reform can promote Industry convergence, refine the division of labor¹⁸, and further boost business quality and vitality; so it'll exert an overall impact for a long time."

 

　　The State Council says that the pilot sector will be expanded to cover rail transport, the postal service and telecommunications "when the time is right".

 

　　Some may think the pace of reform is not fast enough, but Liu Shangxi says a one-off change is not possible.

 

　　"The value-added tax reform is very complex especially in the service sector. To be on the safe side, the central government will expand the reform in several selected industries nationwide, because they have different challenges. For example, the building industry and financial sector are not ready for the reform yet."

 

　　Since turnover tax is a major source of tax revenue for local governments, the reform could re-adjust the revenue distribution between the central and local governments.

 

　　The impact could be as big as that of the tax reform in 1994, when central government withdrew most of the tax revenue ownership from the local authorities.

 

　　The central government will carry out further research in order to better allocate¹⁹ the division of fiscal revenues between central and local governments.

 

　　For CRI, I'm Wang Xiao.

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