Impact Research On The Pilot Reform Of Replacing Business Tax With Value Added Tax In Property And Casualty Industry

With the economic and social development and the upgrading of industrial structure,the financial services industry has gradually begun to replace heavy industry as the main driving force for economic growth.As with other financial sub-sectors,the boosting effect of the insurance industry on the growth of the real economy cannot be ignored.On the one hand,the insurance industry directly drives the overall economic development through continuous expansion of its own operations.On the other hand,it also provides risk protection and capital support for other industries.Starting from May 1st in 2016,the pilot program of replacing business tax with VAT was extended to the last four sectors-real estate,construvtion,finance and consumer services-to cover all goods and services all over the country.And finally the VAT deductions covered all industries.This was intended to ensure tax burdens in all industries would be reduced.Before that scholars and practitioners had already made lots of research on the reform impact by estimating and analyzing the scope and extent of the impact.So far the comprehensive pilot reform has been implemented for more than one year and the expected effect started to show off but still there is little research on the real after-the-reform impact,especially from the perspective of a single company.Replacing the business tax with value-added tax is a vital part of the whole fiscal reform.It affected the property and casualty insurance industry not only by putting on or off its tax burden but also by causing a series of changes in the companies'operating and management.It can even trigger tremendous transformtions throughout the whole sector,like industrial division and industrial upgrading.To explore what kind of economic consequences the comprehensive pilot reform has had on the property and casualty insurance industry in China,how the property and casualty insurers would deal with the opportunities and challenges brought about by the reform,this paper studied both the expected impact and the actual impact of the implementation of replacing business tax with VAT in the insurance industry from the company and industry perspectives,which provided some reference for the evaluation of the reform effect.And by finding out the problems and difficulties encountered by the P&C insurance companies,this paper can help the insurance companies adjust their management methods and tax planning programs so as to respond actively to the changes in taxation policies;and it also provides guidelines for the tax authorities on how to handle practice disputes.The data used in this article are grabbed from the latest corporate annual reports and industrial data,and have certain advantages in timeliness.In terms of expected impact,from the perspective of the experience of VAT reforms in various countries,the expansion of the scope of tax collection and the introduction of a simplified tax rate are the two major means of promoting fair taxation Our reform also tired to use the expansion of the scope of tax basis to release tax burdens,reduce double taxation,and promote tax fairness.In addition,because the reform eliminates double taxation in theory,so it could also reduce the cost of outsourcing services.In the long run,this will help promote industrial upgrading and deepen industrial division.In terms of actual impacts,through the actual impact test on Company D it has been found that turnover tax burden of property insurance companies has risen first and then declined since the implementation of the refom The reform has also led to an improvement in corporate invoice managenent and supplier management.However due to the lack of taxation knowledge and weak tax management awareness among the agencies at or below the county level,the input deduction ratio for some expenses is too low,and there is still space for improvement in increasing input credits,reducing the burden of circulation taxes,and further reducing corporate costs.After the reform,the property insurance industry has not only reduced its turnover tax burden,but also reduced the overall tax burde.The difference between the tax burden of the finance industry and the secondary industry has been narrowed.On the other hand,the expected effect of industrial division deepening in the industry is not yet significant.It may be due to the fact that the current status of the insurance intermediary market is not perfect and the observation time is still short.From the actual data of Company D,we can see that the percentage of premium income from direct marketing channels of Company D has decreased for the second consecutive year after the reform.It cannot be ruled out that contingency played a role,but it can also reflect that insurance companies are making sales plans according to the policy—sales channel selection preferences have changed.Compared with the vigorous development of the insurance agency market,the development of China's insurance appraisal market has been lagged behind.Therefore,due to cost and efficiency considerations,Company D rarely considers buying company-provided institutions to provide services.In the short term it is difficult to see whether the policy has played a significant role in promoting the industry division,and its actual effect remains to be observed for a long time.At the same time,it is necessary to cooperate with other policies of the insurance industry to promote the industrial division.During the interviews with the insurance company staff,the following issues were found to be still ambiguous.Should the insurer pay tax for repaid reinsurance expenses and recovery payments?Whether invoices got from car repairers can be used as input credits?Whether the promotional gifts given to customers or sales agencies should be treated as sales businesses?Interpretations and guidance for these questions given by the tax agencies from different provinces are different from each other,leaving the problems still unsolved from the national level This has added up to the difficulty of tax calculation and declaration and also led to the increase of tax and compliance risks for the insurers.So for the completeness of the VAT credit chain and the tax fairness principle,it is recommended that further united guidance be given at the national level.