The State Council executive meeting announced on the 9th, among the ten measures to further expand domestic demand and promote economic growth, the VAT reform is one of the important contents.
The meeting clearly stated that China will fully implement the VAT reform in all regions and all industries across the country, encourage technological transformation of enterprises, and reduce the burden of enterprises by 120 billion yuan.
Jia Kang, director of the Institute of Fiscal Science of the Ministry of Finance, said in an interview that the VAT transition is actually to reduce the burden on enterprises. Against the background of the impact of the current international financial crisis on China's real economy, China's comprehensive promotion of this reform is conducive to encouraging enterprise equipment renewal and technology upgrades, and promoting enterprises to become long-term investment entities in the market.
VAT is currently the largest tax category in China. In 2007, only domestic VAT income exceeded 1.5 trillion yuan, accounting for 31% of the annual tax revenue.
As a kind of circulation tax, the value-added tax is levied on the newly added value of the enterprise, and is not taxed on the value of the purchase. However, due to the implementation of production-type value-added tax in China, compared with the consumption-type value-added tax widely used in the world, enterprises are not allowed to deduct the purchase of fixed assets, resulting in repeated taxation.
The National Eleventh Five-Year Plan clearly states that between 2006 and 2010, the value-added tax will be converted from production to consumption nationwide. Premier Wen Jiabao of the State Council also clearly stated in this year's government work report that in 2008, the pilot reform of value-added tax reform will continue to be carried out, and research and development plans will be implemented nationwide.
Experts pointed out that the change from production-type value-added tax to consumption-type value-added tax is mainly reflected in the reduction of the VAT tax base. The core content is that the input tax that allows enterprises to purchase fixed assets such as machinery and equipment can be deducted from the output tax, thus avoiding double taxation and minimizing the distortion of taxation on market mechanisms.
As a reform to reduce taxpayers' burdens, the VAT reform began in July 2004 in eight industries in the three provinces and one city of Northeast China. In July 2007, it extended to 26 cities in the six central provinces to continue piloting. The reform has pushed the country to accumulate experience.
Since the beginning of this year, the scope of the VAT transformation pilot has been expanded rapidly. First, the five-city city in eastern Inner Mongolia has been included in the scope of the VAT transformation pilot, and then all the industries in the severely affected areas of the Wenchuan earthquake have been included in the VAT transition.
Ping An Securities analysis pointed out that the VAT transition is a big plus for the stock market. The implementation of consumption-type value-added tax can reduce the burden on enterprises and increase the enthusiasm of enterprises for investment in the short-term. It can stimulate investment, boost domestic demand, promote technological upgrading of enterprises, and coordinate the structural transformation of China's economy.
In addition, from the perspective of the industry, the impact of VAT transition on different industries is not the same. The machinery, equipment, petrochemical industry, electric combustion water industry, building materials industry, steel and food and beverage industries with large investment in fixed assets of equipment and tools in the whole industry have obtained large deductible tax.
Sun Haoshu, chairman and CEO of Inspur Group, said that compared with manufacturing companies, the impact of VAT transformation on software companies is relatively small, but it also has a positive impact on business development. Taking Inspur as an example, in recent years, companies have purchased a lot of servers and semiconductor lighting equipment. After the transition, the burden on enterprises will be greatly reduced, thus freeing up more funds for technological innovation and equipment renewal.
The VAT reform means that enterprises have more funds, which can stimulate the expansion of corporate investment, and is also an important means for the country to expand domestic demand. Zhang Peisen, a researcher at the Taxation Institute of the State Administration of Taxation, told reporters. He pointed out that the VAT reform is not only a means to adapt to the current economic situation to enhance economic strength, but also another important measure of China's tax reform following the reform of corporate income tax.
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