Analysis Of The Effect On Tax Burden And Efficiency Under Replacing Business Tax With VAT On Chinese Commercial Banks

The financial industry is one of the most important industries in our country. Commercial banks are the foundation and core of the financial sector,which is the lifeblood of our economy. Therefore, the healthy development of commercial banks relates to the stability and prosperity of China’s economy. However, to some extent, the tax system hinders the development of commercial banking nowadays. Because of being levied sales tax, there are a series of problems caused for banks, such as:interruption of VAT chain, a heavier tax burden, double taxation phenomenon, unfair inter-industry tax burden and so on. The official implementation from January 1,2012 about Replacing Business tax with VAT brings the dawn to the financial industry. No. 110,111 in 2011 Document offer the policy guidelines and principles to the study of expending reform of value-added tax in financial industry. The method about value-added tax which has been implemented in financial industries on other countries provide experiences for the study of this paper. At present, levying value-added tax on banks is most widely adopted in the world. There are three main measures around the world:EU tax credit, zero tax rate in New Zealand and allowing part of input tax credited in Singapore and Australia. In addition, there is a theoretical methods:cash flow method. what measure we should choose is the key point for the reform of value-added tax on commercial banks.Through literature reviews and analysis of the results of other scholars and international comparison, this paper gives a new measure of levying valued tax on banks:tax the deposit and loan business, which takes up the largest proportion in bank business; implement a zero rate method on the export service; levy VAT on all the midst operation and allow some of its deductible input VAT. The method Assumes that the tax rate is chosen among 3%,6%,11%,13% and 17% which comprises a combination of tax rates. Under this assuming method, this paper calculates the actual tax burden of commercial banks before and after the tax reform based on the financial data of listed banks in China, and makes a comparison. It is believed that when the 6%-17% combination is implemented, the change of tax burden after the reform is minimal, which is related to the business structure and scale of banks. Meanwhile, this paper also calculates and analyzes the efficiency of Chinese listed banks after the VAT reform. It is believed that there is a increase in efficiency for Chinese commercial banks whatever tax rate combination is chosen. Finally, according to the results of the actual calculations, policy recommendations is given.