Study On The Issues Of Transformation Of VAT In China

VAT, with its special advantages, rapidly became one of the main taxes in China in the 90s of last century, and has made great contribution to the aspects of financial revenue and economy development. However, during the initial stage, in order to deal with the problems of over-done investment for fixed assets, the unbalance of industry structure and spiral of inflation, China implemented the productive-type VAT. Over the past ten years, with the transformation of macro economy in China, theproductive-type VAT restricts the investment and brings many problems in exports. It proves that the productive-type VAT does not meet the demand of economy development in China any more. In order to improve the situation, the central government of China began the transformation of VAT and three northeastern provinces were chosen as the test fields of reform in July of 2004. In the Government Report for the 10^th National People's Congress, premier Wen Jia Bao also proposed to establish all-around schemes and measures of VAT transformation. Therefore, the VAT transformation is an urgent issue to study.This article puts emphasis on studying the transformation of VAT in China, which was separately explained in five chapters. The first chapter describes the background of choosing the topic, study theory, features and the significant meaning of studying VAT transformation, and makes a brief introduction to the present study status of VAT transformation. The second chapter introduces the definition of VAT, calculation principle, classification feature and the advantages of VAT, and analyzes the history and reasons of the development of VAT, as well as the relation between the selection of VAT type and the economy development. While in the third chapter, by reviewing the development history of taxation and introducing the features of VAT in China, the existing problems of VAT in China, especially the negative ones in the transformation of productive-type VAT, and the advantages of consumption-type VAT are analyzed. Based on the study of the present macro economy operation, tax levy management and theory on VAT transformation, this section also analyzes the conditions and difficulties for VAT transformation, and proposes the necessity of VAT transformation in China. Introducing the main cases and features of VAT transformation in China and foreign countries, making a conclusion to the selection of VAT type in other countries and evaluating the result of test in three northeastern provinces of China, the forth chapter proposes that the attention should be paid to the problems arisen during the period of introducing the practice of VAT transformation in foreign countries and gives some suggestions concerning the improvement of VAT transformation in China.In the fifth chapter, the own opinions about the problems which we are facing in the transformation of VAT, the proper time to carry out the transformation, the credit for input tax of the stocks of fixed assets purchased and the credit for input tax of the additions of fixed assets purchased is given. Under our country's good economic situation in operation, according to the practices in those regions selected for testing, and by using the experience of other countries in the transition period, the author suggests to expand the method of credit for input tax of the additions of fixed assets purchased to all industry fields and raise the portion of credit step by step. In the final part of this chapter, the impact on Guangxi for the transformation of VAT is measured by using the related data and the way to reduce the negative impact is put forward.The whole article makes study on the related issues of basic theory of VAT, the necessity of VAT transformation, the proper time for transformation and specific policies of implementation, and also gives some creative suggestions e concerning problems on the process of implementing consumption-type VAT. Therefore the author hopes this article is helpful to promote the transformation of VAT in China.