A Tracking Study On The Pilots Of Levying Value Added Tax (VAT) In Lieu Of Business Tax

Levying Value Added Tax (VAT) in Lieu of Business Tax is an important content of reform of taxation during the "12th Five-Year Plan" as well as a major reform of tax system after the transformation-oriented reform of VAT, whose essence is to enlarge the range of levying VAT and bring the original industries who pay business tax under the range of levying VAT. This reform will reduce the tax burden of service industry, promote the development of service industry and contribute to industrial structure’s optimization and upgrading, thus realizing the strategic objective of changing the mode of economic development. However, as this reform is involved in central and local income distribution, management rights changes on state and local tax as well as other difficult problems, so the reform cannot be completed instantly. The reform process will be quite complicated, so it is necessary for us to develop the pilots of levying VAT in lieu of business tax and provide experience for the full implement of the reform by pre-pilots. On Oct.26,2011, Executive Meeting of the State Council approved the Pilot Scheme of Circulating-tax System Reform, agreeing to carry on the pilots of levying VAT in lieu of business tax in some industries; on Nov.16,2011, Ministry of Finance and State Administration of Taxation issued Pilot Program of Levying Value Added Tax in Lieu of Business Tax and relevant matching documents, and clearly defined our country would carry on the pilot practice of levying VAT in lieu of business tax in traffic transport industry of Shanghai City and part of the modern service from the beginning of Jan.1,2012, emblematizing VAT reform for broadening the tax base entering practice operational phase from the theoretical investigation phase; on Jul.25,2012, The212th Executive Meeting of the State Council decided to gradually enlarge the geographical coverage of the pilots of levying VAT in lieu of business tax from the beginning of Aug.1and clearly pointed out to choose part of industries to carry on the pilots all over the country in the next year.Levying Value Added Tax (VAT) in Lieu of Business Tax is the prophase exploration of fully carrying out VAT reform, and the effect of pilots decides follow-up reform’s progress and steps, so it is a kind of meaningful thing to conduct tracking study on pilots’operational aspect. On the base of field investigation and study, combined with the actual operational aspect of pilots of levying VAT in lieu of business tax in Shanghai City, this text analyzes these pilots’influence, achieved effect and the open question, on the base of which the text probes into the feasibility and implement mode of fully carrying out the levying VAT in lieu of business tax and brings forward some policies and suggestion for the further implement of this reform. The text consists of seven parts. Part one:Introduction. Mainly introduce the topic background, research significance, an overview of relevant research results, research idea and methods, innovation points and defects. Part two:Theoretical foundation of levying VAT in lieu of business tax. Firstly, to discuss the disadvantages of the two kinds of existing taxes from the point of taxation principle; secondly, to discuss whether levy VAT in lieu of business tax is the need to optimize industrial structure and promote the development of service industry from the point of economic development; thirdly, to discuss whether levy VAT in Lieu of business tax is the need to simplify circulating-tax system and improve the efficiency of tax collection and administration from the point of tax collection and administration. Part three:Pilot Program of Levying Value Added Tax in Lieu of Business Tax and development conditions of pilots. Firstly, to give a brief introduction to the plan’s range of pilots and time arrangement, pilots’tax system arrangement, the interim policy arrangement during pilot period and other main contents; secondly, to give an overview of the development conditions of pilots, including the overall situation, the number of enterprises and the situation of change on the tax burden of these enterprises. Part four:Impact analysis of levying VAT in lieu of business tax. Firstly, to analyze the impact brought to the pilot areas by levying VAT in lieu of business tax from the four fields of tax revenue, industries’tax burden, economic growth and industrial structure; secondly, to analyze the impact brought to the non-pilot areas by levying VAT in lieu of business tax, including advantages and disadvantages. Part five:The results on pilots of levying VAT in Lieu of business tax and the open question. Firstly, to summarize the results from the aspects of reducing enterprises’burden, expanding enterprise market space, promoting the thinning of division of labor among enterprises and improving the completive power of export of enterprises’products and service etc.; secondly, to analyze the existing specific problems among pilot plan and pilot process, including the Lowland Effect of taxation brought by regional pilots, part of industries being unable to completely eliminate double taxation, most logistics’tax burden increasing, general taxpayers’Criterion of Ascertaining being too high and the income of local government in pilot area decreasing etc. Part six:Feasibility of fully carrying out the levying VAT in lieu of business tax and discussion of mode to be used. Firstly, to analyze the feasibility of fully carrying out the levying VAT in Lieu of business tax from the aspects of tax system restriction, using the experience of other countries, pilot experience, economic bearing capacity, and government supporting force and industrial characteristics etc. and put forward individual points; secondly, to discuss the mode to be used to further carry out the reform of levying VAT in lieu of business tax. This text gives the suggestion to adopt both industry pilots and local pilots in the next step of reform of levying VAT in lieu of business tax. As for the industry whose pre-pilot is successful, we can adopt its mode through the country. Part seven:Policies and suggestion for further carrying out the reform of levying VAT in lieu of business tax. Firstly, to amend pilot plan and relevant matching measures, including adjusting the rate of taxation for logistics and increasing the items having discounts, decreasing pilot industries’general taxpayers’Criterion of Ascertaining, increasing local government’s sharing proportion to the central government on VAT, timely starting up the reform of administration for expropriation and management and adjusting the post allocation of national and local personnel who are responsible for expropriation and management; secondly, to accelerate implement speed and expand areas and the range of industries.The research methods adopted by the text consist of method of field investigation and study, method of theoretical analysis and method of demonstration etc. The possible innovation points in the text mainly include three points:firstly, to put forward some solutions to the problem of the increasing tax burden of enterprises after carrying out the reform of levying VAT in lieu of business tax, namely, opportunely adjusting the VAT tax rate of logistics and increasing items having discounts among logistics; secondly, as for the problem caused by the higher Criterion of Ascertaining for general taxpayers, to suggest properly lowering the Criterion of Ascertaining for general taxpayers; thirdly, to give some improvement advice to implement mode of the pilots of levying VAT in lieu of business tax, suggesting adopting both industry pilots and local pilots in the next step of reform of levying VAT in lieu of business tax. As for the industry whose pre-pilot is successful, we can adopt its mode through the country. The possible limitations in the text mainly include the following two points:firstly, owing to short pilot time, much related data cannot be got timely. While studying the influence on the taxation of pilot areas and the tax burden of pilot industries caused by pilots, we simply conduct some simple static analysis with simple cross-section data, and some qualitative analysis of pilots’ influence on economic operation because of the shortage of data; secondly, owing to the limitations of our knowledge about interfacing discipline, our capacity to analyze and study questions and time, our study may not be thorough, and the research conclusion drawn by us is not necessarily accurate.