The Research On The Impact Of VAT Reform On Banking Industry

As an important part of the national economy, the healthy development of the financial sector is the foundation of macro economy running well. Since the taxation system reform in 1994, Chinese government has been carrying a dual-track system of both business tax and added-value tax in the financial industry. But due to the rapid development of financial markets, the existing business tax system has been hindering the operation of the financial sector. Serious problems as double taxation and unreasonable high tax bearing ration are not conducive to social division of labor and the development of financial markets. In order to accelerate the process of internationalization of financial markets, and promote the healthy development of China's economy, the Chinese government proposed the structural taxation cuts as an important content in the twelfth five-year plan, and began to replace business tax by the VAT gradually. China's Administration of Taxation officially announced the "the pilot program of VAT reform" (Finance-Taxation [2011] No.110)in 2011, stipulated to implement the new system of VAT, started with the transportation and services industry in Shanghai. And decided to put in practice nationwide afterwards. According to the government work report by prime minister Lee, the VAT reform program will start on May the 1st. The new practice of the VAT reform announces that the tax rate is 6% for general taxpayer, and the method of calculation will be common taxation method. From the process of VAT reform in other industries, we can see there are still many problems yet to solve. Such as the imperfection of tax collection system, uneven distribution of tax fee between central and local governments. Facing the new tax policy, financial enterprises need to make many adjustments in order to ensure the implementation smoothly. From the perspective of the financial sector, this paper analyzed and discussed the necessity of the implementation of the VAT reform program, as well as the resistance would be encountered. In this paper, we focus on the most important part of the financial sector-commercial banks. By collecting the data from annual reports of listed commercial banks, we analyze the impact of VAT reform.This paper includes five parts. The first part introduces the back ground of this research and the importance of this topic. The second part introduces the theoretical basis about this analysis, and describes the existing business tax system in financial industry and lists the disadvantages of the current system. And this part also introduced the new VAT policy, and the changes financial enterprises will encounter. In the third part, we use hypothetical model to describe the effect on commercial banks, and then we collect the data from the annual report of several commercial banks and calculate the differences of some financial index. The fourth part is about the differences the banks will encounter on accounting system and the management of bills. In the fifth part we bring up some suggestions about completing the process of reform.