Research On Changing Business Tax To VAT In China’s Real Estate Industry

China’s real estate industry plays an important role in China’s economy. From the macro point of view, there is a great connection between the development of the industry and the development of the economy; while from the micro point of view, the real estate industry also relate to citizen’s lives. As the continuous increase of the price of the real estate, China’s government has taken various measures to lead the market to develop in a steady way. Taxation has been an important means of government regulation of social economy. With the ongoing of VAT reform, the real estate industry inevitably becomes the focus of next round’s reform. According to the Chinese tax regulation, the business tax on the real estate industry includes business tax on building industry and business tax on the transaction of real estate. The VAT reform of real estate industry involves different parties’ interests, the government, the real estate enterprises and citizens. In this paper, the study is based on the welfare of the residents.The main contents of the study are as follows:The first chapter is introductions, the main contents include the background and significance of this study, literature reviews, methods and.The second chapter is the theory related to VAT transformation Pilot Programme, including financial income principle theory, fair and efficiency principle and welfare effect theory.The third chapter describes the current situation of China’s real estate’s business tax system and the tax burden of China’s real estate industry. Through the analysis of real estate industry’s business tax regulation, we can learn the existing problem of the business tax system.The fourth chapter is the price effect analysis. We study the price effects of tax reforms, which are based on the methods of input-output analysis. We can find out how tax reform affects the price of goods.The fifth chapter is the welfare effect analysis, which is the core part of this study. In this part we estimated the welfare effects of the residents using the results in the fourth part.The fifth chapter is introduction and comparison the practice of foreign countries on how to apply VAT system in real estate industry.The last chapter is conclusion and policy suggestion. First, we made a summary of previous and analyses the results. Then we made some recommendations for the VAT system of the real estate industry that we recommend a broad tax based with low tax rate VAT system would be a considerable choice. The tax rate could be11%and the tax based would include the building activities and sales and leasing activities of real estates. We should keep a balance between the interests of the government and the interests of the enterprises and the residents. We should take various problems into consideration while putting the VAT reform in practice.The main contribution of this paper lies in the following two points:First, from the perspective of welfare effect, we estimated the result of real estate industry applying VAT system, which we provided a theoretical basis for the practice of reform. Secondly, combined with practical experience in foreign countries, we provide specific policy recommendations for the VAT Transformation Pilot Program of China’s real estate industry.