The System Design And Social Impact Of "BT To VAT Reform"for Banking

The reform that replacing the business tax (BT) with value-added tax (VAT) is another major reform since the Fiscal and Taxation System Reform in1994in China. However, there’s still some issues need resolved, which may hinder the reform. The most important is the system design of the transaction of BT into VAT. Because of this, the necessity of banking VAT reform has been questioned. Based on this, the author hoped to provide some ideas for the solution of the problem according to his own research. In addition, the text also gave some assessment and analysis on the social impact of banking VAT reform.The structure of this article is as follows:Chapter Ⅰ, including the background and significance of this study, the literature review and ideas and innovation of this essay; Chapter Ⅱ described the current situation of the domestic and foreign banking tax system, mainly talked about the BT and VAT. And combining with the status quo, it proved the necessity of China’s banking VAT reform; In Chapter Ⅲ, the writer analyzed China’s current status quo of VAT reform, then combing the reality and science, the essay gave out the most likely system design for the reform, including the tax basis and tax rate; On the basis of previous research, Chapter Ⅳ made further analysis on the influence of VAT reform on taxpayers, the State Administration of Taxation and Local Taxation bureau, central and local financial ownership, then proposed countermeasures and suggestions; Chapter Ⅴ is a brief review of the full, and the outlook for China’s future reform of the tax system.The main conclusions of this essay are as follows:China’s banking VAT reform is necessary; of all the four banking income mentioned in the essay,"fee and commission income" and "other income" as "dominant fees" should be charged in accordance with normal VAT;"Hidden fees" like "investment income" should exempt from VAT, while the "net interest income" from net interest spread (NIS) should be simply levied; the best tax rate is6%. After the reform, the banking tax burden was essentially flat, and the reform will benefit downstream industries and consumers more. In short term, there is no merger trend of State and local tax, and the local tax system needs to find a new main taxes, the property tax may be the choice. The central and the local need redraw VAT sharing ratio, for the sake of macroeconomic control, the specific proportion will slightly inclined to the central government, between "five to five" and "six to four".