On the Development Strategy of China's Value-Added Tax (VAT) Reform

Анотація

Along with the official replacing of Business Tax with value-added Tax (VAT) for some business sectors in Shanghai’s pilot zone, the issue of VAT reform has attracted widespread attention from the public. This paper will first outline the basic concept of VAT, and then briefly elaborate on the advantages and disadvantages of VAT, the emergence and development of VAT, the introduction of VAT to China and the course of VAT reform in China. The proposed implementation of the VAT pilot program in Shanghai is only a fundamental component of optimising the VAT system. In order to simplify and make the VAT system efficient, China must continue with its VAT reform in accordance with the standards of modern VAT. On 26 October 2011, a State Council executive meeting decided that from 1 Jan 2012 onwards, the VAT system reform will be deepened in pilot zones for some regions and industries, thus gradually changing from imposing business tax on certain industries into levying VAT. Expanding VAT reform is a highlight of the 12th Five-Year plan tax reform. After the trial, the VAT reform may extend from certain regions and industries to the entire country and more business sectors respectively, thus delivering benefits to related industries and enterprises. This reform is beneficial in lowering the price of goods and services, boosting consumption, improving welfare and accelerating the transformation of China’s economic development model.

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