The Economic Impact Of China's Transform From Business Tax To VAT

In order to promote and perfect the tax system, In 2011 November, the Ministry of Finance and the State Administration of Taxation jointly issued the program. The program includes the pilot industry, province and the tax payer, clearly declared that Shanghai will take the lead in carrying out the transform from business tax to VAT in January 1, 2012 in transportation industry and part of the modern service industry. Because the reform went smoothly in Shanghai and gained a lot of achievements, in order to speed up the process, Li Keqiang chaired a State Council executive meeting in April 2013, decided that the transform from business tax to VAT will promote across the country, to make all the country enjoy the reform benefits. As one of the most important measures of tax reform, the transform from business tax to VAT is very important to perfect the way of adjustment of our economic system, fair enterprises tax burden and promote economic growth. Therefore, timely analysis of the VAT reform's economic impact is very important to use the policy and promote China's economic development.Based on reading a lot of literature, the paper analyzes emphatically the VAT reform's effect on the enterprise tax burden, investment in fixed assets and economic growth. Because the reform firstly changes the tax rate, it will be bound to affect enterprise tax burden, the paper uses the statistical calculation method to analyze the impact on the tax burden of small-scaled enterprises and part of modern service industry in general tax payer enterprises of the VAT reform. After the reform, the tax rate of the small�scaled enterprises has decreased, and the tax basis has changed, therefore,the tax burden has reduced. For the general taxpayer enterprises, not only the tax rate has changed, they are also allowed to deduce the tax, the tax burden of general tax payer enterprises has ups and downs. The paper uses the dull regression to analyze the investment and VAT data from 1994 to 2013 and defines the VAT reform as the dull variable, we draw a conclusion that before the VAT reform, the VAT increases 1 yuan, the investment will increase 12.48 yuan. After the VAT reform, the VAT increases 1 yuan, the investment will increase 15.83 yuan. The influence of the VAT reform for fixed assets investment has increased. By employing granger causality test, we find that the growth of the difference between VAT and the business tax is the cause of the GDP growth.Through co-integration analysis, we find that in the long term, the difference between VAT and the business tax increases 1%, the GDP will increase 1.02%.In order to analyze the short-term relationship of the difference between VAT and the business tax and GDP, the paper uses error correction model. The model shows that the VAT reform will promote the economic growth. Finally, the paper provides advice for our country to make full use of the VAT reform.