The Financial Influence And Effective Strategies Of Replacing Business Tax With VAT To X Construction Enterprise

In long term,there are two taxes which were business tax and value-added tax in China,which resulted in some problems such as double taxation and unequal tax burden between different industries.These economic problems should to be solved through the tax system reform.From January 1,2012,transportation industry and part of modern service industry began the work of experimental unit of“value-added tax replacing the business tax" in Shanghai.With ever-deepening tax reform,the pilot project of "replacing business tax with value-added tax(VAT)" is gradually extended to other provinces and municipalities across the country.Since May 1,2016,the replacement has been thoroughly implemented in const ruction,real estate,financial and life service industries.The replacement is faced with a co mplicated situation in construction companies,involving a broad range of aspects and man y relevant upstream and downstream industries.This paper studies the case of construction company X.It expounds the problems it faced with after the replacement,and analyzes cha nges in the company's main financial indexes,so as to provide advices to construction com panies and the tax authorities.First of all,this paper reviews some relevant literature at home and abroad in recent years,and analyzes the feasibility and significance of replacing business tax with VAT in construc tion industry based on theories of business tax and value-added tax.Second,by studying th e case of construction company X,the paper introduces the financial features of constructio n companies and points to the replacement's negative influence on construction companies'invoice management,input tax deduction and cash flow.Then,it analyzes the replacement's main financial influence on construction companies in terms of revenue,costs,tax burde n,capital and liabilities.This paper argues that,in the current circumstance,construction c ompanies may suffer from a severe lack of input VAT deduction according to general tax ca lculation,so the replacement may lead to higher tax burden and costs.However,from a Ion g-term perspective,levying VAT is conducive to the sustainability of construction compani es.In the end,some advices are provided to both construction companies and the authoritie s.Construction enterprises should improve the standard of supply management,choice right suppliers,increase the degree of mechanization,reduce labor costs,strengthen cash management and invoice management etc.It is advice that the authorities can launch some preferential policies,such as expanding the VAT deduction scope of the enterprise,and increasing financial support to make the tax reform working smoothly.