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VAT reform brings substantial benefits to enterprises

Wang Yanfei
Updated: Dec 28,2016 7:15 AM

Only 1.5 percent of millions of corporate taxpayers face a higher tax burden after implementing value-added tax reform, senior officials with the nation’s top taxation bureau said on Dec 27.

“VAT reform has brought significant benefits to enterprises across sectors,” said Wang Lujin, chief accountant of the State Administration of Taxation. “It is absolutely acceptable to see 1.5 percent among millions of taxpayers experience higher taxes at the time when we have a long way to go to refine the VAT taxation system.”

Data from the administration shows that by the end of November, the tax burden of 106.9 million corporate taxpayers engaged in the last four sectors of this round of VAT reform has been reduced by 110.5 billion yuan ($15.9 billion), a reduction of 14.7 percent compared with the same period last year.

VAT reform, launched in 2012, which aims to replace standard business income taxes with VAT, has finally spread to the four sectors-construction, real estate, finance and consumer services.

VAT is a consumption tax placed on a product whenever value is added at a stage of production and at final sale, according to Investopedia.

Complaints alleging a high tax burden in China arise from many firms failing to get invoices for tax refunds, either because of a lack of knowledge or tax evasion issues, Li said.

Li said the reform would have a long-term positive effect because companies need to get invoices at every link along the production chain.

“Companies would have more incentive to pay tax in accordance with the law in order to get a tax rebate,” he said, citing the example of Haidilao Hot Pot.

Chen Yong, the company’s taxation chief, has said it got a 45 percent tax cut in three months by incorporating every step, from food purchases to delivery services.