The State Council executive meeting on Oct 30 decided to abolish the business tax, which has been in force for over 60 years.
The meeting decided to put an end to the provisional regulations on business tax and revise the provisional regulations on value-added tax (VAT).
Premier Li Keqiang said as the overall promotion of the VAT reform was consolidated by legislation, the business tax comes to an end.
“In order to consolidate and expand the achievement of the VAT reform in tax reduction, relevant laws and regulations should be amended accordingly,” the Premier said.
In 2012, the VAT reform was first carried out in Shanghai’s transportation industry and part of its service industry. That was another move of the government to cut taxes, a major step at the time as it was facing declining fiscal revenue in an economic downturn caused by the international financial crisis and unbalanced domestic growth structure.
“It seemed a risky move, but we have made it,” the Premier said.
In order to carry out the reform in a safe and orderly way, a pilot program was carried out in some industries and regions before the VAT was expanded nationwide, he said.
Rintaro Tamaki, deputy secretary-general of the Organization for Economic Cooperation and Development (OECD), said that despite various difficulties, China has effectively guarded against possible risks and made remarkable achievements in its VAT reform.
The Wall Street Journal said that the overall implementation of China’s VAT reform has a pioneering significance for the VAT reform in the world.
Statistics revealed that the VAT reform has not only released tax burden in all sectors but also effectively expanded the tax base. By now 1.7 trillion yuan ($257 billion) accumulated tax has been reduced for enterprises and the monthly increase of the number of tax payers in four major industries — construction, real estate, finance and services — reached 140,000 in 2017.
Premier Li said the smooth implementation of VAT reform has further injected vitality in the market and economy which laid solid foundation for positive economic growth.
The Premier urged further consolidation and expansion of the valuable results achieved by VAT reform and continued efforts to improve related polices. For now, transitional and supportive policies in some industries should remain unchanged and appropriate policy adjustments should be made to push the reform, he added.
The meeting on Oct 30 passed a draft that puts an end to the regulation on business tax collection and rectified that of the value-added tax to reinforce VAT reform.
With no more business tax being collected, the scale of VAT taxpayers has been adjusted, including groups and individuals engaging in sales service, intangible asset, property. Tax rate for selling or importing goods such as grain, books and feed should be lowered from 13 percent to 11 percent, according to the meeting.
Premier Li stressed that efforts should be made to deepen the VAT reform and strive to push China’s economy to reach middle and high level ends.