Tax Planning Considerations Of Ningxia Post Corporation Based On A Tax Reform Program Of "Replace The Business Tax With A VAT"

In China, all the consumer goods are subject to both the business tax and the value-added tax, which cause taxes becoming a significant component of prices. Consequently, the inherent irrational and structure defects of the current tax system gradually expose and are frequently questioned. As long as the economy growth consistently, the existing tax system cannot cooperate with an economic structure optimization. Therefore, on 1st January 2014, the State Council selected China Railway and China Post to test the restructuring tax system which uses the business tax to replace a VAT".The purpose of the new tax system was to avoid business tax duplicate levied and reduce the tax burden for business organizations by changing the tax model from after-tax prices to pre-tax prices. Ningxia Post Corporation which is one of the subsidiaries of China Post Group Corporation is a national public services enterprise. Before adopting the new tax system, the corporation had an operating income 339.58 million yuan and remitted VAT and business tax 1.14 million yuan and 3.67 million yuan respectively in 2013; while in the year of 2014, the corporation gained an operating income 371.89 million yuan, and submitted VAT 4.88 million yuan and business tax 2.34 million yuan. However, due to a complicated organization hierarchy, a wide business scope and sophisticated accounting procedures, the company encounters a great challenge for tax planning and tax management after the tax system alternation.This article aims to identify the changes of the tax burden for NingXia Post Corporation with the background of "replace the business tax with a value-added tax", and to seek a solution to offset the adverse effects of the changes of the tax system. Based on the circumstance of "replace the business tax with a value-added tax" in the postal industry and a significance of tax planning, the paper provides detailed content about the tax reform, and states and analyze existing and potential issues for the company, such as tax burden, tax management, corporation competitiveness, specialization and so on. The thesis attempts to find the most beneficial method in practice to mitigate tax-related risks, reduce the tax burden, improve profit margin, and encourage the company to consider a long-term strategy. Furthermore, it also gives several suggestions and recommendations to assist the postal industry to alter its tax planning policy and objective.