Analysis On The Change From Business Tax To Value-Added Tax Of China’s Construction Industry

Since the implementation of tax-sharing system reform in1994, value-added tax and business tax as a turnover tax of the two most important taxes in China, have begun to run in parallel. With the continuous development of market economy, the business tax alone and the simultaneous existence of business tax and value added tax have aroused serious problem of duplicated taxation, which destroy the VAT deduction chains. Besides, business tax have been hindered the upgrading of economic structure, and have been not conducive to the industry specialization and the social division under market economy. Thus, in November2011, the Ministry of Finance and the State Administration of Taxation issued "the Pilot Proposals for the Change from Business Tax to Value-Added Tax "(Cai Shui [2011] No.110), the transportation industry and part of the modern services in Shanghai began to carry out this proposal, which aimed to expand the scope of VAT, reduce the flow of tax-related industries, achieve the structural tax reductions, and ultimately promote the optimization and upgrading of industrial structure. Since2012, the transportation and part of modern services in shanghai began to reform,"replace the BT with VAT" experienced the expansion of the geographical and industry. As in March2014, the pilot has been extended to the whole country and cover the entire transport, postal services, and7modern services. The tax reform over2years has obtained the obvious effectiveness, indeed steadily released tax reform policy dividends. By the end of2013, there were2,725,000taxpayers into "replace the BT with VAT," including548000in transport,2,177,000in modern services. Last year, the pilot cut the total tax of140.2billion yuan, including60billion of pilot taxpayers’tax regimes to convert increase and80.2billion of non-pilot taxpayers deduct tax cut.China’s construction industry belong to the business tax levy, due to the characteristics of construction industry, the current value-added tax has some overlap, resulting in double taxation. Construction is the middle part of the national economy, because the industry cannot be deducted, the entire chain of production of value-added tax breaks, which is not conducive to the healthy development of the construction industry and its downstream businesses; the " consumption-type VAT " implemented in2009increased the tax burden on the construction industry, because the purchase of fixed assets cannot be deducted, it hinders the industrial transformation and upgrading of the internal construction updates and high-end technology equipment to some extent. Therefore, the construction industry is bound to replace business tax to VAT. However, in the process of VAT pilot, as the first industry entered the pilot program, constriction absents the expand several times, indicating that the complexity and particularity in construction itself will make it encountered many difficulties in the reform process, Therefore, this paper analyzes the difficulty to change VAT of construction,this special industry, put forwards the corresponding solution ideas and countermeasures, hopes to provide some policy reference for the VAT expansion of construction industry and the tax reform.Through analysis, viewpoints presented in this paper is due to the construction industry under the current business tax system have many problems, such as deductions chain breaking, serious double taxation and so on, its " replace the BT with VAT " in the reform is inevitable. But because the diversity and complexity of construction industry, reform process will be the plight, and the construction companies and the tax authorities have been put forward higher requirements. Therefore, before construction change VAT, the government should conduct an analysis of the actual situation of the industry, to develop a tax program suitable for business development, including tax rate, the input VAT deduction. Besides, for the impact "replace the BT with VAT" to the business and government, it should also deal with policy measures to ensure the reform develops smoothly.