An Alalysis Of The Influence That Business Tax Is Converted To VAT On Banking Industry

In2012, our country carried out the regional pilot to replace the business tax with VAT in transportation industry and partial service industries and planned to popularize the reform over the country.In this reform, financial industry has not been brought into the pilot project. Banking industry has always been an important component of national economy and significant power to push the development of national economy. The tax system for banking industry is an important factor to affect the performance of banks. Our tax system for banking industry is badly designed with heavy tax burden which has a strong impact on performance and the ability of competition of banks and is not conductive to the development of banking industry. Therefore, it is imperative to reform the tax system for banking industry. Bringing banking industry into the scope of VAT is beneficial to solve the problem of repetitive taxing mainly, to reduce the tax burden of banking industry and to improve its international competitiveness. Under the circumstance that the replacement of VAT in banking industry is imperative, the analysis of influence after the replacement of VAT benefits the perfection of the VAT system, rational tax structure design for banking industry and healthy development of banks. In most countries who build VAT system, most financial transaction are excused from taxes. However, tax from financial industry is a prime source of national fiscal revenue in China. As a result, duty free on financial industry in China will reduce national fiscal revenue greatly which is greater than it can stand. For this reason, our country needs to explore financial VAT system which is suitable for China’s situation.The paper will apply theoretical analysis and calculation of sample data to analyze the influence after business tax is converted to VAT from two aspects, performance and tax burden in order to provide thoughts for financial VAT system design. Around above targets, the thesis will be expounded from four aspects. The first part introduces backgrounds and significances, the current research, thinking of study, innovations and shortcomings. The second part is the necessity that business tax is converted to VAT in banking industry in China. First of all, I will discuss our tax policies for banking industry. Then I will come up with some problems including repetitive taxing, heavy taxation, unfair taxation and lagging taxation policy about innovative financial products. The third part introduces some taxation policies of part of countries and what they enlighten our country. The fourth part is the core of the paper which analyzes the influence that tax transformation has on performance and tax burden of banks. I will study from cash flow, profits and tax burden. Thereinto, the influence on profits will be studied by earnings per sharing and return on equity while the influence on tax burden will be studied by turnover tax, construction tax and extra charge for education, income tax. The fourth part offers suggestions for perfecting the banking VAT policy including formulating VAT system according to the features of banking industry, arranging the steps reasonably from business tax to VAT, reforming finance-tax distribution between centre and locality, strengthening the perfection of supporting measures. From above analyses, we can learn that if we collect VAT from banks by tax-exemption method, tax burden of banking industry will be decreased and performance will be enhanced.The thesis will apply the combination of theoretical analysis and calculation analysis to discuss the influence VAT expansion in banking industry brings and gives corresponding suggestions, which makes the paper more systematic. Besides, the article adopts relative datum of the five big state-owned commercial banks and eight listed share ownership commercial banks from2010to2012to measure the concrete numerical results about cash flow, profits and tax burden. Especially, the paper analyzes the difference of tax burden between expropriating VAT under duty free method and expropriating business tax. In addition, the thesis proposes to adopt duty free method in the short run, and adopt duty free with input tax deducted method in the long run. One of the shortcomings is that I simplify the formulas when measuring, and overlook some other factors which will influence the results. In addition, the shortage of my theoretical and practical experience will generate limitation to the height and depth of research.