The Expected Impact On Tax Burden Of Construction In Yunnan With Being Taxed VAT Instead Of Business Tax

Construction is a pillar industry for Yunnan economy, playing a stronger role in driving the economy forward and absorbing employment. The VAT has been rolled out nationwide on transportation and partial modern services industries. The substitution between Business Tax and VAT in construction had been added to reform scheme-[2011] no.110file. Meanwhile the tax reform is irreversible and will have great significance on construction development in Yunnan.The substitution between VAT and Business Tax takes up about80%of taxes on construction in Yunnan, will have an important influence on city maintenance and construction tax, educational surcharge, corporate income tax, and change the existing tax burden level.Tax burden acts on the configuration of saving, investment, labor elements by tax economic effect, to affect the development of enterprise and industry. Much private enterprise, less highly qualified enterprise, small profit margins, laggard corporate management are characteristic of construction in Yunnan,which has a lower tax burden than the national average now. Under the effect of the VAT on construction, they are crucial how will the tax burden change and how to reply.Firstly, the thesis calculate the theoretical change of circulation tax, city maintenance and construction tax, educational surcharge, corporate income tax, and tax burden based on the production method and relevant provisions of the Tax Law. The conclusion is:after VAT replaces Business tax on construction in Yunnan, the VAT may be negative, and the circulation tax burden will reduce significantly because of the wide range of deductible inputs whose rates are higher than11%mostly. Maintenance and construction tax and educational surcharge will reduce because of reduced tax base. Corporate income tax base will increase substantially to prompt companies to pay more income tax. Considering the changes in various taxes, the overall tax burden of construction in Yunnan will decline slightly. Secondly, the thesis combines the actual situation of construction in Yunnan to study how will the actual tax burden change and the reasons why the tax burden will change. The conclusion is:affected by the deductible difficulties of input tax and tax environment during the transition phase, the actual tax burden will increase substantially.Finally, to improve the tax environment, and meet substitution between Business Tax and VAT in construction more smoothly, the thesis proposes some measure with these reasons why the tax burden will increase.