Study On The Influence By Replacing Business Tax With VAT Upon Financial Leasing Industry

Value Added Tax(VAT) and Business Tax are the two main turnover taxations in our country, despite of construction industry, the secondary industry of our national economy is VAT levied while Business Tax covers most of the tertiary industry. Along with the continuous development of our national market economy in the past decades, the disadvantage of the co-existence of the above two taxations has been reflected, manifested as repetitive taxing, which directly results in increasing enterprise’s tax cost, prejudicing the current enterprise reform and even bringing adverse impact upon our national economy. Therefore, from the aspect of industrial integration, optimization and development, replacing business tax with VAT will be of great importance in boosting our national economy.Leasing industry has always been sensitively linked to the direction of VAT reformation. Due to the pre-determined disadvantage of repetitive taxing of business tax, it’s imperative for our country to replace it with VAT which is more scientific and neutral. Since 2012, four years has witnessed our experiment of such replacement, with the experimental area started from Shanghai to eight provinces and finally the whole country, the effect of structural tax reduction has gradually become apparent. The above mentioned reformation of tax reduction opens the channel of VAT deduction for leasing companies and further will attract more corporate clients with great credit and abundant financial resources to get involved in this market. Nonetheless, magnitude challenges are also confronted by leasing companies under such reformation policy environment, challenges like restriction about sale-leaseback business, impact upon the current business model, increasing of tax rate due to inadequate of input tax etc.This paper, based on a thorough study of the influence upon leasing companies by replacing business tax with VAT and from the perspective of the nature and orientation of leasing industry, studied the business and tax difficulty thereof, researched the innovative cases, aims to propose some suggestion about tax reformation for the next stage and eventually hopes to promote the developing and perfecting of VAT institutional reform for leasing industry.