Research On The Effects And Countermeasures Of Replacing Business Taxes With A Value-Added Tax To The Local Taxes Income Of Hunan Province

From January 1, 2012, the transportation industry and part of modern services industry in Shanghai begin making experiment of the value-added tax, which opened the big screen of the reform program to replace the business tax with the value-added tax. Then, the railway transportation industry, postal serv ices industry and the telecoms industry join the army. The reform progress smoothly and achieve initial success—the pilot regions, industries and business burdens decreasing significantly. However, the impact of the reform to the local tax revenue can not be ignored. Under the existing mechanism of sharing VAT between the central government and the local government, the VAT which act as a sharing tax replacing of the business tax which act as the subject tax of the local government, is bounding to damage th e benefit of the provincial government. Local taxes decrease and financial situation exacerbate in the short time. Therefore, only to accurately estimate the impact of reform to the income tax, can we control the design of the reform program in the financi al sustainability range, and pave way for the next step to push forward the reform steadily. In this paper, we use the input-output model to estimate the overall expand of value-added tax in the Hunan Province, and its impact to local tax revenue.Firstly, this paper introduce the related theory of reform of placing the business tax with the value-added tax, and its impact on local taxes revenue, research the effects path under the basis of defining the concept of local tax revenue. Using the actual data of the year 2007-2014,introduce the basic situation of Hunan Province before the reform and the basic policy of replacing the business tax with the value-added tax. Then, this paper focusing on the impact of the reform on VAT, business tax and enterprise income tax in the year of 2013 and 2014,by analysis the statistical data related indicators.Secondly,this paper use the input-output model, simulate the impact of the reform on the local taxes revenue. By choosing and adjusting the data range of industry, we making some policy assumed in the simulation. On this basis, this paper design the formula of estimating of the tax-base and revenue, and simulating the impact of the reform on the local taxes income, using the data of input-output tables of 2007.Finally, on the base of the analysis above, this paper propose some suggestions on reforming the VAT sharing ratio, cultivating local subject taxes, strengthening tax collection and tax safeguard, to increase local financial resources, promote local financially sustainable countermeasures and suggestions.