Deepening China’s VAT Reform And Improving China’s Mode Of Tax Collection And Administration Based On The EU Experiences

Value Added Tax (Hereinafter referred to as VAT) with a board tax baseand the tax neutrality, has been implemented widely in most countries. Thetransformation of VAT, the first largest type of tax in China, contributes morethan half of our tax revenue. Recently, the Value Added Tax reform(hereinafter referred to as VATR) has caught a wide attention. The programreplacing Business Tax (hereinafter referred to as BT) with VAT in thetransportation, asset leasing and modern service sectors, has been leading to achain reaction. For example, it will influence the profitability and tax paid forour many enterprises; it will affect about our fiscal income and incomeallocation system; it will lead to the transformation of tax administration andexert a great impact on China’s current taxation regulations and methods.This thesis mainly covers the following issues related to VATR, its effectson China’s macro tax burden and its fiscal revenue, the changes in tax burdenof small and medium-size enterprises in related industries, the changes in thestatus of tax authorities and the changes in tax collection and administrationmode. The problems with VATR include a high cost of taxation, theunreasonable tax rate hierarchy, the insufficient tax deduction to push taxburden high indirectly, etc. based on the research of the VAT regime appliedin some EU countries, the paper proposes the EU VAT regime with advancedexperiences in the following fields. For example, the coordination of EUcountries, the VAT regime applied in the postal and telecommunicationindustry, the implementation of a fixed tax-rate for small business, the flathierarchy of tax authorities, the classified administration of tax fund and itsautonomous tax services as well.Last but not least, the paper proposes that our government should furthertrans-form government functions and the market play its role. Our VATregime should strengthen its normative regulations, safeguard the deductionright for consumers, and rationalize the tax base and the tax rate. We should enhance the multi-channel tax services and management. The paper thusproposes to build the flat hierarchy of tax authorities, to carry out a classifiedmanagement on tax revenue and to optimize the tax inspection bureau. Therehave been a variety of outlooks of VATR in the upcoming postal andtelecommunication industry. Hope this paper could also provide insights forthe contemporary tax practices and reform.