City VAT pilot hailed a success by authorities
By Maggie Zhang |
April 29, 2012, Sunday
|
Print Edition
Print Edition
A VALUE added tax (VAT) reform pilot launched in Shanghai in January is working well and will be extended to other parts of the country, China's central finance and tax authorities said yesterday following a city inspection.
"The pilot is running smoothly with early signs of its effects evident," the authorities said.
"On average, the program has cut the tax burden for industries taking part in the trial and spurred development in the services sector."
Senior finance and tax officials, including Finance Minister Xie Xuren and Deputy Finance Minister Wang Jun, visited Shanghai yesterday to see how the pilot is running.
Since January 1, Shanghai businesses in the transport, construction and certain modern services industries - such as research and development, information technology, cultural products, leasing and consulting - have been producing accounts based on VAT instead of business tax.
VAT rates are 17 percent for leasing current tangible assets, 11 percent for transport and construction, and 6 percent for modern services.
Unlike business tax, which takes between 3 to 20 percent of a company's total revenue regardless of operating costs, VAT allows companies to claim "input tax credit," such as expenses for machinery, fuel, other goods and services subject to VAT.
By the end of March, 129,000 companies had joined the trial.
The pilot has helped strengthened competitiveness, participants said. Authorities have seen Shanghai, which has a strong services sector, as a test ground for the reform, part of wider initiatives to cut the tax burden on individuals and companies. In Shanghai, fiscal revenue rose 6.7 percent to 110.4 billion yuan (US$17.5 billion) in the first quarter.
"The pilot is running smoothly with early signs of its effects evident," the authorities said.
"On average, the program has cut the tax burden for industries taking part in the trial and spurred development in the services sector."
Senior finance and tax officials, including Finance Minister Xie Xuren and Deputy Finance Minister Wang Jun, visited Shanghai yesterday to see how the pilot is running.
Since January 1, Shanghai businesses in the transport, construction and certain modern services industries - such as research and development, information technology, cultural products, leasing and consulting - have been producing accounts based on VAT instead of business tax.
VAT rates are 17 percent for leasing current tangible assets, 11 percent for transport and construction, and 6 percent for modern services.
Unlike business tax, which takes between 3 to 20 percent of a company's total revenue regardless of operating costs, VAT allows companies to claim "input tax credit," such as expenses for machinery, fuel, other goods and services subject to VAT.
By the end of March, 129,000 companies had joined the trial.
The pilot has helped strengthened competitiveness, participants said. Authorities have seen Shanghai, which has a strong services sector, as a test ground for the reform, part of wider initiatives to cut the tax burden on individuals and companies. In Shanghai, fiscal revenue rose 6.7 percent to 110.4 billion yuan (US$17.5 billion) in the first quarter.
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