The Analysis Of The Impact On Attestation And Consulting Industry Of Replacing Business Tax With VAT

Attestation and consulting services industry is an important branch of modern service industries, aiming at promoting enterprises’management and operation and helping regulate their economic activities. The provision of attestation and advisory services tends to create a fairer and healthier market environment to market players.However, the development of attestation and consulting services is constrained to some extent by the tax policies, and it is necessary to provide a favorable tax environment to attestation and consulting services. A pilot program of replacing business tax with Value Added Tax (VAT) launched in Shanghai as of2012, and it has expanded nationwide since August1st,2013. The pilot program is conducted at the background of structural tax reduction in China, through which attestation and consulting enterprises expect the reduction in their turnover tax burdens. But according to the pilot, this reform is not favorable for all enterprises. Therefore, it is very necessary to recognize what impacts this reform will have on attestation and consulting enterprises, and understand how to deal with the issues arising from the reform.First, this paper introduces the history of the VAT reform in China and the background for the replacement of business tax with VAT in attestation and consulting services industry, followed by a summary of Chinese and foreign views on the scope and rates of VAT imposed, as well as the logic, methodology and novelties of this paper. In chapter2, this paper analyzes the current situation of attestation and consulting services in China, and summarizes points of the current VAT policies reform in this industry. Chapter3analyzes the tax policy’s impact on enterprises’tax burdens. Particularly for VAT general taxpayers, the analysis of the change in their tax burdens is given with an example of a tax agent, through a scientific estimate based on their financial information. And their tax burdens turn out to be increased, due to the limited VAT deductions. Then chapter4presents the tax policies’overall impacts on the attestation and consulting services industry, including mitigating double taxation, encouraging subcontracting and separation of services, and affecting financial accounting. From the perspective of enterprises’operation, chapter5describes the policy’s impacts on their business expansion, the choice of taxpayer statuses, pricing strategies, and the selection of their suppliers. According to the impacts mentioned above, suggestions are proposed in chapter6. For the current VAT policies, VAT should cover more industries and the relevant annual taxable turnover threshold should be adjusted, as well as improving the tax incentives. Meanwhile, enterprises should seize the opportunity to expand their business and choose the VAT taxpayer status carefully. Also developing a reasonable pricing strategy and strengthening internal control are necessary. Enterprises should take every opportunity brought by this VAT reform, and be ready to cope with the challenges.The novelty of this paper is that the analysis on the practical problems for attestation and consulting services industry, brought by replacing business tax with VAT, is based on an existing enterprise and its financial information. Besides, this paper gives targeted and practical advice on the VAT policies and attestation and consulting enterprises, when it comes to the new tax environment, along with the changes in their tax burdens and the challenges in financial accounting and business operation.