A Research On Tax Reform Of Levying Value Added Tax In Lieu Of Business Tax

In1994, China undertook a comprehensive reform of the tax system and set up VAT,business tax as the main system of turnover tax. VAT tax is limited to production,marketing, retailing and wholesaling of tangible personal property and area ofmachining, repair services; while the range of business tax is from transportation, postand telecommunications to construction and other industries. The turnover tax systemadapt to the level of collection and management and the level of economic development.However, with the development of the Socialist market economy, two parallel tax on taxprinciple against the principle of fairness and efficiency and tax administration hasincreased tax costs. Due to the business tax set the full amount of business tax as the taxbase, which does not have characteristics of VAT deduction, thus making the deductionsin the operational chain is not complete and the tax burden increases with increasingcirculation links, resulting in double taxation problems, even having an impact on thedevelopment of social production and the adjustment of industrial structure andpreventing development and expansion of the service industry. Therefore, whetherconsidering about the characteristics of VAT and the deficiencies of business tax or theinfluence VAT have on the economy, VAT is urgently needed in China to further expand.November16,2011, approved by the State Council, our country decided to levyVAT in lieu of business tax in the transportation industry and part of modern serviceindustry, taking Shanghai as a pilot from January1,2012. On the basis of the standardrate of value added tax17%and13%low tax rate, added11%and6%two tax rates.Since August1,2012, upgraded expanded to Beijing, Shanghai, Tianjin and other citiesfor ten provinces and cities. On April10,2013,Member of the Standing Committee ofthe State Council decided to further expand the business tax levying VAT reform, andfrom August2013,1,it will extent across the country levying VAT on transportation andmodern services, and snagged a railway transportation and telecommunicationindustries incorporated into the trial VAT reform. Since August1,2013, our provinceshave started to extend the scope of levying VAT.The tax reform of levying VAT in lieu of business tax has profound necessity and wide range of practical significance. Levying VAT in lieu of business tax conform to theprinciple of fairness and efficiency. It is the fundamental initiative to improve theexisting system. The reforming policies affect the tax bearing of a number of corporate.Tax reform will facilitate the reconstruction of the main tax and local tax system andwill generate tax distribution fiscal system reconstruction. The social-economic effectsof the VAT reform is in favor of eliminating double taxation and industry faircompetition; and conducive to the development of the third industry needs to get started;and conducive to the promotion of employment.At present, our province was plagued by double tax parallel; on the one hand,double tax parallel provincial tax brings me a problem. Because of business tax andVAT taxation objects exist on a certain range of crossover phenomena, especially inhybrid sales and diversified into existence, making the tax staff confuses to classify thetax objects accurately, resulting in tax collection and management chaos. This also left agap to taxpayers to evade payment of the tax and it is not conducive to the increase inthe tax rate. On the other hand, double taxes parallel have an adverse impact onindustrial development. Business tax systems impede the further specialization oftertiary industry; parallel tax double is bad for the fusion of two or three industries; thecurrent tax system caused heavy tax burden of tertiary industry; the current tax systemhinders the internationalization of tertiary industry, therefore, VAT will spread around.The tax reform of levying VAT in lieu of business tax must proceed from ournational conditions also draw on international experience. Now the tax reform in ourprovince faces many challenges, they are mainly that the central and local financialresources distribution problem; VAT tax collection levels and departments will facechallenges; it is harder to tax collection and management; unit settings need to beadjusted and VAT tax structure is a stub; there are too much tax rates grades and taxincentives and "tax neutrality" at odds. According to France, the United Kingdom, NewZealand and other countries, foreign VAT is imposed widely, covering the entireproduction, distribution and service industries; tax grade is less; duty-free provisionsmainly apply to necessities of basic consumption needs, or certain activities in thepublic interest, and so on. According to the international experience, the scope coveredby the sales tax associated with the stage of economic development and tax is not a one-step, but gradually broadened. Combining with the experience at home and abroad,for the province’s existing problems this article make the following responses: first, weshould Optimize the structure of tax allocation and improvement of Central and localtax income distribution pattern; on the premise of tax distribution system, improvedistribution; improve the tax distribution reform, build local main tax. Second, weshould reduce tax collection difficult and improve tax collection and managementcapabilities; reducing the taxpayer’s standard-setting and determine reasonable rates andpreferential policies designed to improve tax revenue collection capacity. Third, weshould set the reasonable preferential tax rate and tax policies and optimize the structureof China’s tax system; improve rate design, develop three VAT rates and perfecting thepreferential tax policies.