Research On Transformation Of VAT (Value-added Tax)

The transition from a planned economy to a market-oriented one in China requires a nearly complete overhaul of the tax system. As we all know, the transformation of the value-added tax (VAT) is regarded as a cornerstone of the necessary tax reform. Under a VAT, the sum of purchases and the value added by the firm itself equals, by definition, the value of the inputs of the next firm in the production-distribution process. As a result, the same value added is never taxed twice. At present, the majority of counties carry out the consumption value-added tax in the world. The production value-added tax which is carried out since 1994 in China has negative effects on investment and exports. The reason why we choose the production value-added tax is that production value-added tax can provide an exceptionally stable and flexible source of government revenue and it can effectively do well to deflation. Ten years past, the production value-added tax is no longer fit for China. More and more experts and enterprises have a proposal for the transformation of the VAT. As a result, the reform of VAT transformation began in North-east China in 2004. In this paper, we will discuss the relevant issues about this transformation. There are five Parts in my paper. In the first part, I introduce some domestic and foreign academic information in the field of the VAT. In the second part, I explain the differences between these three types of VAT, and the advantages of the transformation of VAT. In the third part, we pay more attention to the effects of the transformation of VAT on accounting and finance. We do study on transformation of value-added tax under static model, and even analysis its effects on assets and debts, profit and finical index .The fourth and fifth parts are the key points of this paper. In the fourth part, it is about the time-choosing and the critical analysis of final results. At first, we introduce the back-ground of this transformation of VAT. In addition, I use a lot of first-hand statistics which is from state tax bureau of Jilin province to analyze the distribution of enterprises in Jilin province. At last, I try my best to find the reason why there is such a difference between the anticipation and the final results of the transformation of VAT in Jilin province. In the fifth part, the last not the least, we did some useful design on tax policy. During the period of this transformation of VAT, the most difficult thing is how to face the sharply deceased financial revenue. In this part, we introduced some worldwide valuable experiences about the transformation of VAT, For instance, we can increase the tax rate; collect a new type of tax; try to decrease the tax –free policy, etch. In my opinion, we should allow the high-teleology enterprises have more privileges in this transformation of the VAT, and we should allow some state-owned enterprises to free the historical owing tax and keep the transformation of VAT is strictly under the supervision. In this paper, we discuss a lot of questions about the transformation of VAT, such as the reasons of this reform, time-choosing, final results, etc. The most valuable thing, I believe, is that we did our utmost to do some useful designs on tax policy. No doubt, the reform of this transformation of VAT in North-east China will prepare the most useful experience for the final arrangement of transformation all over the china. I hope that my paper will be useful for that.