The Research Of Deepening The Reform Of China's VAT System

This dissertation studies the reform of the VAT system of China. The VAT system has been introduced in China over20years, and been reformed and improved in comply with the international and domestic economic environment. The financial crisis triggered by the U.S. subprime mortgage crisis was sweeping the globe sinee the end of2007, the United States, the Euro area, Japan and other deve loped countries were fallen into severe economic downturn. Although a variety of ways to stimulate the economy have been adopted, the world economy has been mired down i n a deep adjustment period,the major developed countries arelack of growth momentum, and emerging economies are also facing the pressure of development and economic transformation. All of these factors have a negative impact on the exports of our country. Many problems have been exposed during the process of economic development such as the industrial structure is irrational; the imbalance between investment and consumption, the income distribution is unreasonable and so on. The problems need to be resolved by adjust the economic structure, change the mode of economic development.China has been pursuing a proactive fiscal pol icy to expand domestic demand since the end of2008, to cope with the profound changes in the international and domestic economic situation. We implemented the measures of structural tax reduction, to expand the scope of deduction of VAT, reduce the tax burden of goods, and lower the price of commodities ultimately. We carried out the VAT reform in2009and2013. The VAT system changed from production type to consumption type in2009, and expanding the range of taxation in2013. However, due to the target of VAT reform is not clear and specific, the VAT system is given too much of macro-control functions, and the design of VAT system is too complexity. Our VAT system needs further reform to eliminate the adverse effects such as hinder the upgrading of quality and efficiency of economic and the changing of consumption power.This dissertation researched the main design ideas of commodity tax of the optimal commodity tax regime, and analyzed the application of optimal commodity tax theory in the VAT system, and proposed the goal and focus on the reform of the VAT system. The overall objective of deepen the reform of the VAT system i s to ma i nta i n the status of the ma i n taxes of VAT and ra i se revenue effect i ve I y, to promote industrial restructuring to achieve stable economic growth, and to establish a sound deductive mechanism to improve the efficiency of VAT system. The specific objective is to establish a modern VAT system which reflects the tax neutrality.There are three specific reform schemes:constructing perfect deduction mechanisms of VAT,achieving the neutral of VAT system in the international trade, and eliminating the negative effects of financial revenue of local authorities which caused by the reform of VAT system.There are three ways to be needed to construct perfect deduction mechanisms of VAT.Broaden the tax base to cover all the goods and services, unified tax system, and implemented the registration of taxpayers.To achieve the neutral of VAT system in the international trade need to do the following aspects:to select the destination principle for taxation, to build a thorough and transparent system of export tax rebates, and to design the special VAT system for imports of services and intangible.With the expanding of the scope of the VAT, main financial support of local government is exiting, the revenue of local government will reduced significantly,and VAT sharing system between central and local institutions need to be adjusted, not only to adjust the sharing ratio, but to solve some problems existing in the current system gradually.This thesis verifies the main conclusions by use of empirical research methods. Compared with three schemes of VAT system based on the2010input-output tables, the first scheme is the original tax system, the second scheme is the existing tax system, and the third scheme is virtual future VAT system, empirical results show that full deduction mechanism is in line with the neutral VAT system, and minimum the degree of distortion in the economy. Therefore, the future reform of the VAT system should try to maintain tax neutrality, avoiding the use of differential rates of multiple files, complicated tax incentives to achieve macro-control goals, but should play better advantage of the VAT neutral, give full play of the resource allocation function of market.This thesis proposed a method of reverse charge to solve the difficulties of construction and financial sector. There is a lot of sub-contracting business in the construction industry; the input tax cannot be deducted fully because of the difficulty in obtaining a VAT invoice. It is difficult to.determine the value added of intermediary business of financial sector.The VAT revenue has been shared between the central and local governments and the business tax revenue belongs to the local government since the reform of system of tax distribution. With the expanding of the scope of "the VAT, main financial support of local government is exiting, the revenue of local government will reduced significantly, and VAT sharing system between central and local institutions need to be adjusted, not only to adjust the sharing ratio, but to solve some problems existing in the current system gradual ly. We need to solve some problems such as the Investment-oriented economy of local government, the reflux of wealth between regions, thefiscal revenue of local government reducing and so on. And the measures we should take is to clear the expenditure responsibilities and administrative authority of local governments and rationalize the fiscal power at all levels of government, to optimize the structure of transfer payments, and to build the local tax system.