Research On The Value Added Tax Transformation To Economic Influence In Jilin Province

The province of Jilin, as the cradle of Chinese automobile industry as well as the base of important petroleum refining industry, is the province that China lays more stress on in investment and construction during the early times of the nation and has contributed more to the national economic development. Since the reform and opening to the outside by the end of 1970's in China, Jilin province has met the unprecedented difficulty in economic development, a great deal of state-owned business enterprises stopping production, a large number of workers coming off work, the social security system facing the rigorous test, so that the economic development has come to stagnation. The predicament of Jilin province also have reflected the whole circumstances of the three northeast provinces, in which Liaoning and Hei longjiang with more industry weight have faced greater difficulty as well. The development in state-owned big and medium-sized enterprises in the three northeast provinces concerns the progress of the Chinese industry modernization and even whether the target that the Chinese economy keeps on the growth in the following 20 years can carry out smoothly or not. Under the circumstance, the Central Government and State Department make the decision on implementing " Rejuvenating the Old Industrial Foundations in the Northeast China ", the Value Added Tax (VAT) transformation is exactly the core contents of the policy.The VAT is a tax of absolute consequence in current Chinese tax system, and covers about 50% of total tax revenue. At present our country carries out the productive VAT, only few nations besides China in the world use that type of tax. The productive VAT has the positive effect in increasing finance income and repressing overmuch investment. However, from the perspective of development, the consuming VAT is inevitable. Compared with the VAT of other types, consuming VAT is the most normative and thorough one, since it resolves repeating taxation by the root with the embodiment of the principle of fair tax burden, and contributes to increasing investment and promoting long-term economy development. Therefore, the smooth implementation of the VAT transformation in northeast region, not only relates to the rejuvenation of the northeast old industrial base, but also positively makes for probing into the comprehensive tax system reform in China.In September 2004, the Ministry of Finance and the State Administration of Taxation put forward Rules on Several Problems in the Enlarging Value Added Tax Deduction Scope and Temporary Rules on Enlarging the Value Added Tax Deduction Scope in 2004, which allow the eight greatest industries in the northeast old industrial base to deduct the amount of the sale tax of fixed assets that this year compares to add than last year since July 1 in 2004. That stands for formal and comprehensive start of tax preferential policies in rejuvenating northeast old industrial base and experimental unit in the VAT transformation. Under the move of the VAT transformation, enterprise structure will adjust, industrial technology upgrade accelerates and the economic vitality promotes obviously. In the year 2004, the GDP of the province of Jilin came to 312.2 billion dollars, increasing by 12.2%, which is the fastest speed during the continuous years, and experimental unit in the VAT transformation of Jilin Province has achieved success in the beginning.Experimental unit in the VAT transformation in China complies with the situation of the economic development and the direction of Chinese market economy system reform. The transformed VAT policy much more matches the principle of the VAT deduction, meets the request of the Chinese tax system reform, and even brings Chinese VAT system in line with international usual practice. However, the VAT system of China transforms from productive type to consuming one, which is a huge engineering and a more endless process. The experimental unit reform of the northeast region is not the VAT transformation in the real meaning, but a limit at the purchase tax of newly added fixed assets of the machinery equipment type in the eight greatest industries only, and can deduct with the VAT which the current year compares to add than last year. To be more accurate, the reform should be called as the reform of enlarging the VAT deduction scope. This text has brought to bear some related theories such as the Investment Multiple Principle of the Economics, Taxation Multiplier Theory, Business Life Cycle theory and Market Equilibrium Theory and by dint of a great deal of authority data adopted qualitative and quantitative analytical means, combined the academic analysis with the substantial one, analyzed the present condition to carry out the consuming VAT in the northeast region, and studied the influence to the total investment amount, the increased quantity in investment, total tax amount, industrial structure and business enterprise financial condition in Jilin province etc.. Based on the above-mentioned research, we have drawn the conclusion that the VAT transformation policy is not complete consuming VAT, and has not eliminated repeated taxation. The transformed VAT has four characteristics: firstly, the policy only allows to deduct the VAT included in the equipments investment rather than the one involved in the non-equipments fixed assets; secondly, the policy allows to deduct the VAT included in the newly added equipments investment other than the one involved in the existed equipments investment; thirdly, it only faces to the eight industries and besides other industries are not excluded; finally, the purchase tax of the fixed assets which the business enterprises buy outside may be deducted under the premise that the VAT has increased. In addition, with the dissimilarities with what international normal practice goes through in the VAT, currently our country collects the VAT and business tax abreast, and a great deal of enterprises in the third industry collect the business tax, which causes that the value added in the production includes a great deal of service charge from the third industry, so that the phenomenon that VAT collect repeatedly is still very serious.Therefore, we should accelerate the VAT transformation reform in the northeast region, and transform the VAT system of China to the complete consuming mode in the shortest time based on the experience in experiment, so as to reach the neutral and fair goal.