Research On The Fairness Of Tax Exemption Of Military Products

Tax preference is a way to reduce tax bearers’ burden by offering them favorable taxtreatments. In order to support the development of the military related enterprises in ourcountry and to enhance the modernization of the defense equipments, under the approvalof the State Council, all products manufactured, sold and supplied by entities within themilitary group (“military entities”) and certain military products manufactured, sold andsupplied by some entities out of the military group (“common entities”) shall be exemptedfrom value-added tax (“VAT”). However, in the actual VAT exemption operation process,there is great gap in the treatment and procedures of the military entities and commonentities. Especially on the aspect of the VAT exemption procedures, the review andexamination on common enterprises are much stricter.The unfairness on the tax imposition intensifies the unequal competition between differenttypes of entities, which is deviated from the tax fairness principle.This paper discusses and compares the procedures of VAT exemption of military productsmanufactured, sold, supplied by the military entities and some common entities within theChinese Academy of Sciences. At the beginning, the First Chapter elaborates the generaltheory of the tax fairness principle, explaining the basic meaning and the measurementcriteria of the tax fairness principle. Then the Second Chapter mainly discusses the generaltopics of VAT exemption on military products, which includes the development historyand the legitimacy analysis of the VAT exemption system. Next, the Third Chapterdescribes the procedure of VAT exemption on military products, compares the differenceof the VAT exemption procedures between the military entities and the Chinese Academy of Sciences, and makes the fairness assessment on the difference of the VAT exemptionprocedures on the ground of the first chapter. In the end, Chapter Four analyzes theproblems existing in the current VAT exemption system on military products and theharmful consequences, and puts forward proposals for reforming the VAT exemptionsystem on military products.