The Value-added Tax Reform Research On China’s Insurance Industry

China has always followed the dual tax regulation system with the coexistence of value added tax and business. The VAT is still not wide covered to all service industries, including finance and insurance industry, the double taxation issues related to these industries is still very serious. Currently, China’s insurance industry to adopt business tax system has many drawbacks, seriously affect the healthy development of China’s insurance industry. The insurance industry is an important social "stability", the establishment of a scientific and reasonable tax system also has far-reaching significance for the smooth development of China’s social and economic. Throughout other countries, many nearly put the insurance industry into the value-added tax, which is a good solution to the problem of double taxation. With the development of the growing internationalization of the financial and insurance industry in China and the improvement of the level of tax collection, incorporating the insurance industry into the value-added tax collection and management system has become a big trend.Currently, most of the domestic insurance tax system merely involves in how to improve the existing sales tax system and the income tax system, almost no separate article involves in levy the VAT on the insurance industry. This article takes it as an entry point, using a combination of theoretical and empirical method, studying the drawbacks of the current business tax system of China’s insurance industry, the difficulties and feasibility of the changing to VAT, summing up the theory of tax method for the financial and insurance industry as well as the practical experience of foreign countries in this regard, the VAT system of China’s insurance industry designed on this basis.The theoretical part of this paper generally can be divided into three parts: First, drawbacks of the current business tax system of China’s insurance industry; Second, drawbacks and feasibility of China’s insurance industry to change to VAT; Third, the design of the VAT system of China’s insurance industry. From the first part of the analysis, the conclusions include following parts:The double taxation problem is serious in China’s insurance industry and its related industries, the design of tax rate is unreasonable, and the scope of tax incentives is relatively small. In order to solve these drawbacks, the insurance industry should change to VAT. From the second part of this paper, we can draw the following conclusions: Though most of the insurance industry is difficult to determine the value of the implementation of the VAT, the financial and insurance industry can meet consumption characteristic of VAT, and because it is an emerging service industry, it has the inherent power and external conditions to change to VAT. In the fourth part of this paper, the three taxing theorists and the successful experience of foreign insurance industry VAT are summed up, on the basis of which China’s insurance industry specific VAT system is designed, the mode is stated as follows: First, the non-life insurance industry can use the New Zealand mode; Second, the cash flow method in theory, is an ideal mode of taxation for the life insurance industry, but because of its complexity it is difficult to implement, the best mode of taxation of life insurance is fixed proportion deductible mode; subsidiary of the insurance business can learn from New Zealand division of life insurance and non-life insurance.The empirical part includes two aspects of the tax calculation estimated the tax burden of the insurance industry and the tax rate of China’s non-life insurance. We collected data of the total profit and the business tax of the domestic part of the insurance company and the Beijing Social Services from2009to2011, the insurance tax burden is more heavy than the Beijing Social Services Second, the article also collected China’s non-life insurance industry premiums income and premium expenses from the period2004to2011, in order to calculate the non-life insurance business tax rate, and ultimately our ideal VAT rate range of4.41%-8.83%.This paper analyzes the design principle of the VAT system of China’s insurance industry from a novel angle, introduces taxation process with drawing to make the reader be able to clearly understand this article. We also present a unique perspective on the design of the VAT system of China’s insurance industry. For non-life insurance industry, this paper calculated the approximate range of its value added ideal tax rate; for life insurance industry, the paper analyzed how to use cash flow method to tax the life insurance industry in detail. In addition, the subsidiary of the insurance tax system has a innovation perspective.