The Study On The Impact Of "Replacing Business Tax With Value Added Tax" On China's Insurance Companies

This paper firstly reviews the historical process of "replacing Business Tax with Value Added Tax" in China,and then analyzes the problems existing in the collection of business tax in the insurance industry.In addition,the methods of collecting VAT in foreign insurance industry are discussed.Drawing lessons from the experience of imposing value-added tax in foreign insurance industry can help China's insurance industry finishes the smooth transition of "replacing BT with VAT".This paper focuses on the analysis of the influence of "replacing BT with VAT" on the other taxes and claims of insurance companies in the next place.To study the impact of "replacing BT with VAT" on the change of the tax and the net profit of the insurance company,this paper select Ping An Property and Casualty Insurance Company of China as a case analysis.It is found that when the payment expenditure is deducted by account the insurance company's turnover tax falls more than deducted by invoice at the rate of 6%.To minimize the adverse impact of"replacing BT with VAT" on insurance companies,insurance companies should reprise the insurance products.This paper collected the operating data of insurance companies in our country from 2009 to 2016,using the effective tax rate(ETR)index to measure the tax burden of property insurance companies and life insurance companies.It is found that property insurance companies' business tax burden is heavier than life insurance companies'.Furthermore,this paper using "reverse restoration approach" and "basic exemption approach" to measure the actual tax burden level and their changes in the property insurance companies and life insurance companies before and after "replacing BT with VAT" at the rate of 6%.The results show that "replacing BT with VAT" makes the actual tax burden of insurance companies decline whether using "reverse restoration approach" or "basic exemption approach".But "basic exemption approach" could reduce the government's revenue by exerting tax exemption on earned premium,which would put pressure on the government's finance.Then this paper conducts an empirical analysis of the actual tax burden on China's listed insurance companies'operating performance.It is found that the actual tax burden has an obvious negative effect on the net profit of listed insurance companies.