Replacing the business tax with VAT has reduced taxes by a total of 469.9 billion yuan from January to November and is expected to slash 500 billion yuan for the whole year, the Ministry of Finance and the State Administration of Taxation said at a joint news briefing.
Wang Jun, director of the State Administration of Taxation, elaborated on the tax reduction brought by VAT reform with two sets of data.
GDP growth for this year is nearly the same as last year. And overheated real estate market and the Producer Price Index (PPI) turning positive are two special factors driving the growth in taxes. But the average tax revenue dropped by 5.3 percent from May to November, said Wang.
From May to November, profits at industrial enterprises above designated size rose by 10.1 percent, while it dropped by 1.4 percent during the same period last year, Wang added.
He said the drop in tax revenue and the rise in profit at industrial enterprises both show that VAT reform undoubtedly played a vital role in reducing taxes for enterprises.
It improved the efficiency of enterprises and stimulated the vitality of the market by reducing the government revenue, he said.
Government officials said since the VAT reform was launched on May 1, more taxes were cut each month, which has basically achieved the goal. In addition, tax restructuring was completed, and the reform has contributed to supply-side reform.
He said replacing the business tax with VAT not only directly reduced enterprises’ tax burden but also has spillover and long-term effects.
“VAT reform is not only a reform on the tax system, but also on the monetary management mechanism. It will do more for the real economy, service sector and social development in the coming years,” he said.
Wang said that to truly illustrate the reform results, the State Administration of Taxation set up a special working team to monitor the number changes reported by taxpayers, and compiled by computers. It covered every pilot taxpayer in every pilot sector, added Wang.
If tax increases appear in any sector, the tax administration and Ministry of Finance would release related solutions to guarantee every sector achieves tax cuts, he said.