The Impact Of "Replacing Business Tax With VAT" On The Labor Of Enterprises-study Of Industrial Difference

On May 1,2016,China’s“replacing business tax with VAT” was expanded to all domestic industries.It is the only way for China to improve taxation system to eliminate repeated taxation,inject vitality into the economy,encourage R&D,and promote industrial structural upgrade.However,there are some dispute in the practice and academic research.For example,the “ replacing business tax with VAT ”increases some firms’ tax burden,and “ replacing business tax with VAT ” is not positive to income distribution,and“replacing business tax with VAT” is not positive to the labor input.Among them,the impact of “replacing business tax with VAT” on the labor input is closely related to the residence income.However,the existing literature is less on this issue.It is very important to understand the impact of“replacing business tax with VAT” on the labor input of firms.In addition,due to the characteristics of the industries,there are significant differences in the impact of“replacing business tax with VAT” on labor input in different industries.The analysis of industrial differences helps to understand the impact of reform on labor input more accurately and deeply,to formulate policies better.Firstly,This paper constructed a mathematical model for theoretical analysis,and explained the principle that “ replacing business tax with VAT ” leads to the substitution of fixed assets to labor.We think that substitution effect and income effect both affect the substitution of fixed assets to labor,and the substitution affects labor input.Secondly,this paper constructed a empirical model for analysis.Finally,this paper tested the time trend of the impact of “replacing business tax with VAT” on labor.It could be seen :“replacing business tax with VAT” decreases the labor input of overall industries,financial industry and construction industry;increases the labor input of estate industry and consumer services;increases the substitution of overall industries,financial industry and construction industry;decreases the substitution of estate industry,consumer services.There is a significant difference in the labor input among different industries,and the substitution and labor input in every industry(except consumer service)change in opposite direction.It also could be seen the impact of “replacing business tax with VAT” on labor got weaker over time in thereal estate industry and the financial industry,the substitution of the real estate industry,the financial industry and the construction industry got weaker overtime.Based on the research results,for the financial industry and the construction industry,policies should be formulated to correct the non-neutrality of fixed assets and labor.In addition.The reform made the fixed asset investment and labor input of instruction industry both decline.So attention should also be paid to reducing the tax burden,so that the construction industry can develop better.