A programme to overhaul the mainland tax system for logistics, shipping and other cargo firms by replacing business taxes with a value-added tax has generated mixed views.
Some observers said the pilot implementation of the scheme in Shanghai had already caused confusion and could have been better implemented, while others said there had been little impact so far.
The reactions followed initial reports that mainland authorities were to extend the pilot VAT scheme from Shanghai to Beijing from July 1. But the Shanghai Securities News reported last Monday that the roll-out of the trial in Beijing and other cities and provinces including Shenzhen, Xiamen, Hainan, Anhui and Fujian had been postponed to early October.
Under the Shanghai pilot scheme, value-added tax replaced business taxes on a raft of freight transport-related services from January 1.
This made airlines headquartered in Shanghai, including China Cargo Airlines and China Eastern Airlines, subject to VAT on domestic cargo shipments, while airlines not headquartered in the city continued to pay business taxes. International shipping lines, logistics companies, ship agencies and warehousing operators were also affected.
KPMG, the international tax advisory consultant, said some services bought and provided by these companies were exempt from VAT while other operations should include VAT. Typically, a 6 to 7 per cent VAT rate has replaced an 11 per cent business tax charge.
In a briefing paper, the consultancy firm said the transport and logistics sector faced many complex issues in implementing VAT. 'These complexities are likely to continue for some time as the VAT pilot programme expands across mainland China and until a number of technical issues are resolved,' KPMG said.