A Study Of Impact On The Reform Industries Of The VAT Expansion

At the end of 2011, the State Council announced that some sections in some provinces were chosen for the reform from business tax(BT) to value-added tax(VAT) since 2012 in order to promote the development of the service industries, on which business tax was taxed. Now the fourth edition of the experimental act has launched and the reform has covered such services like transportation services, postal services and other modern services. Universally regarded as good news, this policy would contribute to eliminate duplicate taxation. However, it was reported that some companies joining the reform were bearing more tax than before, which has attracted some researchers.Focused on this phenomenon, this paper has evaluated the tax effects on such industries by means of theoretical calculation and practical evaluation. Input-output table of 135 sections in 2007 and practical data from financial statements of listed corporations is used to calculate the tax burden and its change after the reform and then help to find out the main reasons.The study suggests that the tax burden of experimental taxpayers goes steady and turns to drop slightly. However, it varies widely from different taxpayers. It is true that someone has been imposed heavier burden after the reform. The main reason is that these corporations have a lower cost rate but higher tax rate, which means they might pay more output VAT but get little input VAT from cost for deduction. With the spread of reform, some short-term factors may disappear and lead the burden going down. But the main factors which determine the long-term level remain, which leads to the fact that some taxpayers still suffer a higher burden.This paper suggests that the allowance aimed at keep reform participant from heavier tax than before should be kept until BT has totally turned into VAT, when VAT system should be reconstructed. One solution can be to simplify the tax rate table and to lower the rate in order to promote the manufacture and service industry developing steadily.