Research On The Legal Issues Of VAT Input Tax Deduction

From May 1st,2016,the full implementation of“Replacing business tax with value-added tax(VAT)” have begun in our country.The VAT deduction mechanism is the core of the VAT system.Therefore,it is of great theoretical and practical significance to promote the reform of China's VAT system in the current context.In the VAT management,there are buyers "cargo logistics,capital flow,invoice flow" three flows must be unified,to allow the deduction of VAT input tax claims,the three flows are not inconsistent with the deduction.This argument is based on the 1995 State Administration of Taxation on the strengthening of VAT collection and management of a number of issues notice(Tax [1995] No.192)(hereinafter referred to as No.192)regulations.It is still retained and widely used in VAT management audit,though established 20 years ago.In this paper,through a case of first instance,second instance and retrial,the article shows how the "three flow consistency" clause has been applied.The case was concluded in 2016,although the provision was born in 1995,it has been applied so far.According to the State Administration of Taxation loopholes,one after another was patched.But in recent years,the rapid rise in the level of economic development,the legal provisions are still not added,in reality,the tax authorities still uses the "three flow consistency" clause indiscriminately in the actual cases.It is worth mentioning that in [2014] NO.39,addition to the capital flow,the collection of money also includes obtaining a certificate of claim for sales.On the basis of affirming the three flows,we make some adjustments,which makes the rules more suitable for the current market transaction model.However,after the replacementof business tax with VAT,many of the original business tax levied enterprises have produced many new problems.In the insurance industry,for example,the Insurance Company underwriting income deduction policy is not clear,some tax authorities are not allowed to deduct the input of claims.The China Insurance Regulatory Commission Vice Chairman Zhao Yulong even proposed the accounting department should perfect the relevant collection policies and suggestedthat the financial sector may not require "three in one" pattern,and clearly put out the co-insurance business invoice policy.Especially the national tax administration to answer questions about the input VAT deduction in May,2016 in a video conference,has aroused widespread discussion upsurge of tax profession,the provisions of the "three flowsconsistency " pushed in the teeth of the storm.The "three flow consistency" to the provisions of the credit is now subject to criticism,because the simple cargo flow,capital flow and invoice flow as a VAT deductible input standards,has been unable to meet the needs of the development of reality.The second case is an example.In the inspection process,for the provisions of the ticket paymentconsistency are too rigid,law enforcement discretion is small,and some law enforcement agencies follow the provisionsmechanically.Many enterprises in order to comply with the provisions of the deduction of value-added tax,to avoid tax risk,often change the original convenient trading mode,as far as possible to fully comply with the terms.This clause has a potential impact on the business activities of enterprises,will interfere with the order of the market economy.I consider the legislative purpose of article 192,that the simple application of the provisions is not in line with the legislative intent.Then,from the perspective of the principle of tax neutrality and the protection of the interests of taxpayers,this paper further argues that the terms of the "three flows" are inconsistent with the diversity of economic development and the convenience of transaction.The main reason is that the provisions are too rigid,the tax authorities in the law enforcement did not start from the economic essence,from the macro to grasp the same requirements of the three flows,but to simply and stiffly apply the majority ofprovisions.In view of the above situation,the third part puts forward the corresponding solutions.In fact,three flow consistency and VAT is not directly linked to current,just a favorable tax audit ideas and means.To specify the essence of the "three flows" should change the rigid terms of and be consistent in the macro grasp of the same flow of the three;Secondly,in the tax collection and management,if want to regulate the value added tax we should use the new technology,the Internet technology and the requirements of the tax law,more accurate and effective solutions to the management of VAT.At the same time,we must pay attention to the role of the judiciary in the application of law,the law is always lagging behind,the tax law is no exception.It is necessary for the judicial organs to understand and apply them in the application of specific provisions.In this paper,I study the " three flow consistency " by concept of analysis,case analysis.Through several typical cases,this paper analyzes the rationality,shortcomings and suggestions of the consistent requirements of VAT cargo capital and invoice.The innovation of this paper is to sort out and analyze the problem of VAT deduction through the combination of cases and legal provisions.To combine theory with practice,to think about the problems in practice,and to explore the ways to solve the problems.In reality,it is hard to find a case which is illegally deducted that the tax authorities only judged from the inconsistency of “three flows” and ignored the nature of the transaction.The reason is that the tax authorities are usually fined the enterprises,the illegal deductions are rarely enter the proceedings,and the details are only known by the tax authorities and the punished enterprises.There will be limitations of understanding for the lack of solid theoretical foundation and judicial practice of the author.