Discussion On Effect Of "Replacement Of Business Tax With Value-added Tax"Reformation In China On Enterprise Finance

With the gradual implementation of China’s open policy and reform from planned economy to market-oriented economy, in order to fulfill China’s economic reform, we learn from foreign tax system and establish China’s tax system gradually and orderly. Two big transformations in the Chinese tax system happened in1994and2009, they both promoted the development of economy at that time. The complicated economic environment developed Chinese present tax system with new requirements. Due to the former tax reform that the VAT and business tax exist at the same time, there is a serious double taxation problem, which is not conducive to the advantage of modern VAT. but also hinders the development and growth of the tertiary industry. China’s12th Five-Year Plan proposes to reform the tax system, the plan aim to reduce the scope of business tax gradually, and expand the scope of VAT taxation. Since the burden for company is sensitive to the impact of the tax, accordingly the impact on the company’s finance can not be ignored. It is indispensable to analyze the impact of the reform on company finance and discuss the countermeasures of company’s finance.This paper begins to research on the background of the reform and then analyze the meaning of the research, comb article research ideas and point out the research mentality and the expected contribution of the article and understand the depth and breadth of the theory reform through literature review. Based on this foundation, I take the problem of double taxation and the service industry adversely impact as the starting point to analyze the advantages of modern VAT. Then the tax burden, net profit, cash flow, capital operation condition, solvency, development ability and a series of other indicators was chosen to study the impact of tax reform on the company’s finance, as well as analyze the impact of the tax reform on corporate investment and competitiveness. Afterwards we take construction industry as an example to illustrate the theoretical findings in this research, to concrete the analysis of the background of the construction reform and the financial impact on construction and make the tax planning for the construction industry companies. In the end, we summary of the conclusion of the paper and get the financial countermeasures, such as increasing the investment in fixed assets, strengthening tax planning, and etcetera, in order to fully enjoy the bonus of the tax reform, then point out the limitation of this research and future prospects.This paper argues that the tax system reformation will reduce the overall tax burden for industry, but for a single company, the tax burden will increases or decreases. The company’s debt paying ability, developing ability and competitiveness will be greatly enhanced. Although the reform may be not benefit to all companies, but in general, the reform is the best choice. The contribution of this paper is to summarize the literature review and analysis of the impact of reform on the company’s finance. However, the current study of the impact of the reform on the finance is relatively limited. It is recommended for further research to have more in depth and breadth study.