Empirical Analysis Of China’s Financial Industry Business Tax Replace With VAT Based On CGE Model

With transportation, postal services, telecommunications, and part of the modern service industry have been included in Business Tax to VAT, putting the financial sector into the Business Tax to VAT range has a certain practical basis, so the financial industry reform Business Tax to VAT will be the trend. The financial industry is a pillar industry of national economy, which tax situation is related to the development of national economy and social stability, so researching the economic effects of the financial industry business tax reform to VAT is necessary. Most of academic literature research about the financial industry replace business tax with VAT which is necessary or not, the financial industry VAT model and the financial industry VAT program, but the effects of China’s Financial Industry Business Tax replace with VAT is few and lack of quantitative analysis.Based on the relevant taxation theory and general equilibrium theory, researching the economic effects of China’s financial industry business tax reform to VAT use the tax CGE model. At first, this paper analysis the domestic and foreign literature which is related to financial business tax replacing with VAT. Secondly, because of the current tax system of China’s financial industry has heavy tax burden, difficulties of tax rebates, the financial industry replacing business tax with VAT has some advantages such as avoiding repetition,solving the problem of internal and external tax injustice and so on, so China’s financial industry replacing business tax with VAT is necessary. Then, this paper builds finance tax CGE model by establishing equation system, selecting parameter, compiling the SAM and setting up closed rules. Taking Industrial and Commercial Bank of China as an example tocontrast its tax burden before and after Business Tax to VAT, according to the calculated result that using 5% or 6% tax rate is reasonable. To the tax rate of 5% and 6% as exogenous variables, this paper on the basis of the theoretical model and the tax social accounting matrix with using GAMS language makes a policy simulation. Finally, according to the result of the empirical analysis shows that the financial industry impose value added tax to have a role in promoting economic growth, residents’ welfare level, and this paper proposes the advice of the financial industry accelerate the process of Business Tax reform to VAT and the VAT rate set to 3%-6% differentiated low rates.