Simulation Analysis And Measurement Of Different VAT Rate Simplification Schemes

Value-added tax(VAT)is a kind of turnover tax whose object is the value generated in the process of transfer of goods and services.According to the tax theory,as a turnover tax and an external tax,VAT will directly affect the tax burden of industries,resident income level,real GDP,social welfare and so on.In order to give full play to the role of the "invisible hand" of the market in resource allocation,the tax rate structure should be designed in a neutral way to reduce the extra burden of tax as much as possible.The multi-rate setting of VAT will destroy the integrity of the deduction chain and distort the market price system,thus interfering with the effective allocation of resources and causing the loss of economic efficiency.In addition,multi-rate setting of VAT will also increase the tax department's collection and management costs.After comparing with other countries,this paper find that most countries implement the VAT rate of no more than three levels,and more and more of them gradually reduce the VAT tax rate setting.According to the general direction of the simplified VAT rate and the reduction of corporate tax burden advocated by Premier Li Keqiang,this paper proposes three simplified tax rate schemes.The tax computable general equilibrium model constructed in this paper including 42 production departments,residents,domestic government and foreign departments,simulates and calculates the impact of different VAT rate schemes on the added value of each industry,income and distribution effect and social welfare level,and finally puts forward some relevant policy suggestions.Based on the data from input-output table of 2015,China fiscal yearbook of 2016,China tax yearbook of 2016,this paper compiled the table of tax social accounting matrix,and assembled 42 departments of the input-output table into 23 major departments to build the tax CGE model.The model includes production module,income module,consumption module,foreign trade module,macro closure and equilibrium module,and social welfare module is added according to research needs.Based on the implemented policy of "replacing business tax with value-added tax" policy and the current tax rate structure,this paper designs three simulated tax rate schemes as follows: reduce the applicable tax rate of industries that applied 13% tax rate to 9%,and keep the tax rate of other industries unchanged(plan 3);reduce the applicable tax rate of industries with original tax rate of 13% to 9%,and the applicable tax rate of industries with original tax rate of 9% to 6%,and keep the tax rate of other industries unchanged(plan 4);Introduce a flat tax rate of 8%(plan 5).From the perspective of promoting industrial transformation,the "replacing business tax with value-added tax" policy(plan 1)can most effectively promote the transformation and upgrading of China's industry.From the perspective of income and distribution effect,plan 3,4 and 5 can reduce the government's income level and increase the income level of residents and enterprises.From the perspective of social welfare level,programs 3,4 and 5 can significantly improve the social welfare level compared with the two implemented programs.To sum up,the "replacing business tax with value-added tax" policy and the current VAT rate system can promote the upgrading of China's industrial structure,but it has negative effects on the income of residents and enterprises.Compared with the "replacing business tax with value-added tax" policy and the current VAT rate system,the last three schemes can significantly improve the income level of residents and enterprises,increase the real GDP and improve the welfare level of residents.Based on the empirical results,this paper believes that in the following VAT rate reform,we should take into full consideration the impact of tax rate simplification policy on the total added value of various industries,income and distribution effect,social welfare and real GDP in the general direction of keeping the tax neutral,so as to achieve the maximum benefit of the overall economy as far as possible.At present,China cannot fully and effectively allocate resources only by market,and government intervention is needed.Therefore,we can temporarily reduce the VAT rate to "9%+6%"(plan 3).At the same time,consolidation and lower tax rates will reduce fiscal revenue,which can be ensured by strengthening the collection of direct taxes,such as accelerating the implementation of inheritance tax and property tax reform.Value-added tax is a turnover tax,there is a larger room for transfer during the actual process,which is not conducive to the country's direct regulation of the market.Therefore,we should gradually reduce the status of value-added tax in taxation and increase the proportion of direct tax.