VAT to expand to cut burden on firms
Print Edition
CHINA will expand a pilot reform to replace turnover tax with value-added tax in an effort to reduce companies’ tax burden and curb double taxation, the Ministry of Finance said yesterday.
The ministry is currently working with other government departments on plans to expand the VAT reform to more sectors, including telecommunications, construction, real estate, finance and living services, the ministry said in a statement on its website.
Living services refer to those that meet people’s daily life needs, such as catering, accommodation, hairdressing and photography.
“The country will steadily expand the scope of the pilot reform and strive to complete the reform by the end of the 12th Five-Year (2011-2015) Plan period,” the statement said.
VAT is tax levied on the difference between the cost of production and the price of a commodity on the market. It is favored partly because it can reduce double taxation.
Following regional experiments since the beginning of 2012, VAT reform in transport and some modern service sectors was rolled out throughout the country on August 1, 2013.
The pilot reform was expanded to railway transport and postal service from January 1.
Around 2.7 million enterprises were covered by the VAT reform at the end of last year, a 160 percent surge from the end of 2012, the statement said.
Last year, the reform cut the tax burden for companies by more than 140 billion yuan (US$22.8 billion), up from 42.6 billion yuan in the previous year, the ministry said.
“With the progress of the pilot program, the policies concerning the trials and management measures have gradually become mature,” the ministry said.
The reform has helped by reducing double taxation, promoting the service sector’s development and unleashing the vitality of involved enterprises, the ministry said.
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