The Impact Of "BT To VAT" On Profitability Of Property/Liability Insurance Companies

The policy that business tax to value-added tax is one of the priority issues in China for the past years.This policy had been implemented in some regions since January 1,2012,and until May 1,2016,it has been applied in all industries.Eventually,the insurance industry is included in the range from paying BT to pay VAT.The aim of this tax policy,which implemented by the Ministry of Finance and the State Administration,is to "ensure tax cuts".However,according to the report-The latest development and improvement proposal of the change from "BT to VAT"presented by Zhao Yulong,Deputy Director of the Finance Department of the CIRC,"in the implementation of the first three months,the insurance company's tax burden did not decrease but increase".The fact induces us to think of the effect that the policy will bring to insurance companies in the end,and whether it will reduce the tax burden or increase the company's net profit?If the company want to reduce the tax burden and increase the company's net profit,what level of a deduct ratio need to achieve in the input tax?For the above problems,the first chapter describes the background and significance of the topic,and analyses the current research in the fields.The second chapter introduces the basic theory of business tax and value-added tax,also the special management regulations in property/liability insurance companies and finding that the ROA is the best overall measure of the earning power of a corporation.Then the third chapter analyses the change of the factor using the data of 2015 property/liability insurance companies.These factors including operating income,operating expenses,tax burden,net profit.The following fourth chapter is the regression model selection.I choose twenty-four company's data in 2010-2015 in the China Insurance Yearbook.After the sample data stationary test and regression model selection,the results shows,In the case of deduction percentage is 20%,property/liability insurance companies' tax burden is falling but not increase the profitability.In the case of deduction percentage is 30%,property insurance companies' tax burden is falling and increase the profitability.