The Influence Of "Replace Business Tax With Value-added Tax" On Construction Enterprises

The reason of Tax Reform is nothing else than that the original tax system is no longer adapt to the development needs of the economic situation.Starting in 2012,the major tax reform that replaced Business Tax with Value-Added Tax(VAT)was to adapt to economic development in China,which could also be seen as a further improvement of tax-sharing system reform in 1994.Be subjected to the means of tax levy and game between central government and local government,two tax systems and management systems including central taxes and local taxes were finally established.As a result,taxpayers will be levied on Value-Added Tax when they sell goods or make repairing and assembly business,while they will pay business tax when they provide services,transfer intangible assets and sell real estate.With the rapid development of China's economy,the way of using different taxation systems for different industries has distorted the economic operation and made efficiency loss.The tax reform is not only to adapt to China's economic development needs,but also to conform the inevitable trend of the development of international situation.This paper is based on the perspective of construction enterprises.First of all,it introduces the characteristics of P Machinery Leasing Co.,Ltd.(P)through internal and external environment analysis,which helps to show its unoptimistic business operating environment before the pilot VAT reform.In addition,by comparing enterprise financial data before and after the reform,it shows that such change had negative impact on P's tax burden,cash flow and financial indicators,of which the highest tax burden increased by 43.7%.Consequently,the paper will give detailed analysis from the perspectives of the input tax deduction,market position,tax policy and other aspects.In the early stage of the reform,the imperfect policy would inevitably affect particular industries at different levels.Looking back on the reform process,P Machinery Leasing Co.,Ltd.was identified as a modern service enterprise to carry out reform pilot in 2012,and then experienced disputes that which tax rate(tangible property leasing or logistics auxiliary services)should be applied.The dispute has been solved until the state issued [2016] No.140 in December 2016,which clearly stipulated that the construction equipment leased to others and equipped with the operators is to pay VAT in accordance with the "construction services".Although such identification result gives clear tax rate classification,it approves that P Machinery Leasing Co.,Ltd.as a construction company was 4 years ahead of the pilot reform,which caused huge impact on its operations at that time.Enterprises have to be self-reform in order to survive,therefore this paper also puts forward the countermeasures to solve the problems including improvement of information technology to strengthen the internal control management,and enhancement of tax planning awareness via the invoice management,supplier carding and other aspects.Reform will not be smooth sailing,but enterprises will eventually benefit from it and reflect the original intention of VAT reform through enterprise's self-adjustment as well as continuous refinement and improvement of national policy.