The Effect Analysis On The Reform Of Expanding Vat Levying Scope In China

Since France has introduced value-added tax (VAT)1954, the VAT, which has been used by more than150countries and regions so and swept the globe with the charm of neutrality quickly. VAT, a major tax in China for the past20years, has experienced the process of continuous development and improvement. However, due to historical reasons, the taxation scope of China’s VAT is so narrow that it greatly affects the play of its advantage. The objective of China’s VAT reform has been gradually expanding the taxation scope of VAT. With the optimization of China’s economic structure and needs of implementing structural tax cuts, the central government has decided that the country will start replacing its turnover tax with VAT in the transport sector and some service sectors in Shanghai starting from Jan1. More than a year, the reform pilot has gone smoothly and achieved positive results, and most of the businesses enjoys tax cuts and welcome the reform.Based on this, the central government decided to spread the reform to the whole country from Aug1. This paper mainly discusses whether the Shanghai program can be extended to the whole country, the problems to be solved after Shanghai program extend to the country, and the effect on fiscal revenue, industry tax burden, economic growth after the nationwide implementation of VAT expansion on the basis of Shanghai VAT reform program. The paper also analyses whether the reform is conducive to the goals of structural tax reduction and the promotion of the development of modern service industry and the optimization and upgrading of industrial structure in China. To this end, the paper launches a study as follows:A brief review of the pilot reform, the full implementation and transition process, the throughout analysis of the operation and the problems and reform content in different historical periods, and the demonstration of the necessity and feasibility of VAT expansion reform with reference to the practice of Modern type VAT in some countries.Theoretical reveal of the difference of VAT and business tax on fiscal revenue,corporate tax burden, as well as the structural impact on enterprise production and management on basis of economic and tax theory, as well as system settings of value-added tax and business tax; exploration of the impact on raising financial capital, industry tax burden as well as promoting economic growth after VAT expansion in China.Estimation of the nationwide impact on the industry tax burden and fiscal revenue based on the Shanghai VAT expansion reform program by the use of input-output method. It turns out that:Firstly, the industry tax burden varies, but mainly falls industrial tax burden decrease about1%-2%, the service tax burden changes between-3%-3%; Secondly, fiscal revenue will decrease, of which in pilot industry by about910billion yuan; Thirdly, overall financial effect and industry tax relief will have a significant positive impact on China’s economic growth.Selection of30provincial-level administrative region except Tibet of Mainland China from2001to2011. By constructing the relational model of the value-added tax, business tax and economic growth, study of the impact of VAT and business tax and VAT expansion reform on China’s economic growth by use of China’s nearly11years of tax and economic growth panel data. It was found that the degree of the impact of the VAT increases from16.51%to44.11%, while the impact of VAT and business tax before pilot reform stands33.67%, indicating that the VAT expansion reform has played a significant positive role on China’s economic growth.According to the results of the study and the difficulties faced by VAT expansion reform, the paper summarizes the principles of VAT expansion reform, and puts forward specific suggestion on the distribution of revenues selection of expansion industry, rate design and other aspects.