Studying On The Vat Rate Of Financial Intermediation And Real Estate

The transformation from business tax to value-added tax(VAT) is an important part of China’s fiscal and taxation systems reform and a key measure of structural tax cuts to stabilize growth and adjust economic structure. The design of the applicable VAT tax rate for the two industries is the main content of the reform, which determines the policy effects. So far, the transformation from business tax to VAT of financial intermediation and real estate have not been carried out. And the reform relates to the vital interests of the individuals and enterprises. Hence, there is a big controversy about the applicable VAT rate for the two industries.However, there is few researches study the VAT rate of financial intermediation and real estate of China from the tax burden and economic effects views by applying CGE model. The mostly existing researches on VAT of financial intermediation and real estate only focus on how to balance the tax burden of the two industries in theory. And the designing of VAT equations and the macro closures of mostly existing CGE model are deficient. Besides, simplify tax rate is very rare for research, so more research is needed.Therefore, a static CGE model is constructed to study the VAT rate of the financial intermediation and the real estate of China. The model is based on Lewis macroeconomic closure rules, and assume that there are many people unemployed but lack of capital. Firstly, we designed36tax reform plans about the transformation from business tax to VAT of financial intermediation and real estate based on the existing research literature and government documents. Then we analyzed the simulation results from the view of tax burden and economic effects, and designed a appropriate tax reform plan in order to simplify the VAT rate. Finally, we provided some political suggestions about the transformation from business tax to VAT and the simplify reform of the ranks of VAT rate.The simulation shows that the tax burden of financial intermediation will reduce and the economic effects will develop when the VAT rate is3.00%with the simple collection and supplemented by the general method. The tax burden of real estate will reduce when the VAT rate is6.00%, the tax burden will increase when the VAT rate is higher than11.00%. The tax burden of the industry will reduce after the tax reform owing to add deductible tax. The current VAT rates of the construction, transportation, postal services and the part of modern services are low and the tax burden of these industries will reduce. However the telecommunications’s tax burden will increase. And the simulation shows that the reform plans of transformation from business tax to VAT of financial intermediation and real estate and the simplify reform of the ranks of VAT rate will produce good economic effect.In order to achieve a better effect of tax reform, we propose to speed up the process of the tax reform replaces business tax with VAT, promote the reform of VAT then simplify tax rate. The VAT rate of financial intermediation should be3.00%with the simple collection,supplemented by the general method. The VAT rate of real estate should be6.00%with the general method. Then simplify VAT rate at appropriate time, improve the VAT rate of the construction, transportation, postal services and the part of modern services properly, reduce the VAT rate of telecommunications.