Study Of Value Added Tax Reform On Commercial Banks

Since1993, our country’s tax system reform has set up the turnover tax system which is consisted of business tax and value-added tax. Value Added Tax taxes on selling, importing goods and providing repair and replacement services. Business tax is taxing on providing other taxable services, transferring intangible asset and selling real estate. Double tax system has created heavy tax burden on some industries and has done hann to the professional division of labor and the development of social economy. To solve this problem, the government began the Value Added Tax reform in the transportation industry and some modern service industry since2011. By2014. our country has already created the Value Added Tax system covering transportation (including railway transportation, postal transportation) and part of the modern service industry. But there is no change carried out for the construction, real estate and financial insurance industry. But for the sake of perfecting the tax system and promote economic development, expansion of value added tax reform will gradually cover to the industries.In this article, I choose the most basic and important business units in financial industry——the commercial banks. Through the analysis of commercial bank business, it can be divided into two categories:monetary value business (including the deposit and lending business and financial commodity trading business) and professional services. Through the study of different categories of business income, analogy general trading goods and services, it can be concluded that the general principles of Value Added Tax can be applied to commercial banking. On this basis we can sum up the way to tax VAT in different categories of commercial Banks business and solve the practical problems. Moreover, advanced technology system and strict management of commercial banks have provide specially good condition that other industries do not possess.But there are still some problems waiting to be solved, like how to determine the tax basis and tax rate, how to control tax burden, and how to keep the financial market stable while the reform is going on. To solve those problems, I studied and analyzed some advanced countries which tax their commercial banks with VAT. These experiences have provided guideline for our tax reform. At the end of the article, some suggestions are put forward, including the overall principle and the specific reform plan of commercial bank’s different business.The biggest innovation of this paper lies in the way to classify the business of commercial banks. The business is classified according to how its income is gained, other than according to the general standard. Thus distinguishing the monetary value business from professional services, making what seems to be difficult simple and finding out the accurate added value in different business, thereby setting the foundation to determine the tax basis and tax rate of Value Added Tax on commercial banks.