Economic Impact Analysis Of Value Added Tax In Financial Industry

Structural tax cuts are an important tax reform program in China,and;“replace business tax to VAT" is an important measure.In order to further solve the problem of repeated taxation,improve the taxation system,and promote industrial transformation,in May 2016,the "replace business tax to VAT" policy implements in China,and the financial industry is officially identified as a VAT collection industry.The levy of value-added tax on the financial industry has always been a problem.The financial industry provides a wide variety of services,making it difficult to determine the basis of taxation.Although China began to impose a value-added tax on the financial industry,it was imposed on the tax base of the original business tax.The value-added tax system is not perfect,and there are economic distortions such as the breakage of the chain,which need to be improved.The difference between the tax base and the tax system has different effects on various economic sectors.In order to realize the original intention of this tax reform and determine a reasonable tax base,it is necessary to analyze the impact of the financial industry VAT on the economy.Based on the tax theory and general equilibrium theory,firstly,this paper sorted out the scope of VAT collection in financial industry and compared the statistical classification of financial service and financial industry tax items,in order to compile social accounting matrix(SAM)with VAT on financial industry.Secondly,through the input-output data,I measured the actual tax burden of the banking,securities and insurance industries.The turnover tax burden of the three major industries declined,while the income tax burden increased.Thirdly,I compiled a financial VAT macro SAM and micro SAM in 2012,and used the multiplier analysis method to analyze the impact of the financial industry’s value-added tax on the industrial sector,institutional sector,factor sector and financial instruments,and used a structured path analysis to find the path of the impact on them.The research shows that the value-added tax of the financial industry has different influence on the industrial sector,employment,capital factors,institutional income and financial instruments,and the "service industry" is an excellent intermediary node for the transmission of value-added tax in the financial industry.Fourthly,I constructed a CGE model that conforms to the Chinese VAT deduction system including production modules,resident modules,government modules,non-financial enterprise modules,financial enterprise modules,financial modules,and international trade modules,to analyze the impact of the financial industry VAT on the macroeconomy,industrial structure and financial instruments in the next five years with tax rate of 6%.The study concluded that the value-added tax of the financial industry has a positive impact on GDP and its constituent elements of investment and consumption;the impact on the service industry is greater than that of agriculture and industry,and has a positive impact on deposits and loans,while has little impacts on Corporate bonds.