Authorities set to simplify complex 4-tier VAT regime
Reforms completed in May gave rise to complaints over intricate regulations and heavy, unfair tax burden
China was expected to simplify its value-added tax (VAT) regime in coming years to level the playing field on complaints about rising tax burden and unfairness for businesses, industry watchers said.
The country completed its VAT reform on May 1, requiring the remaining four industries – finance, construction, property and consumer services – to pay VAT instead of business tax.
Under the overhaul, businesses faced at least four tax rates based on what industries they belonged to: 17 per cent or 13 per cent for sale or imports of products, 11 per cent for transport and property lease or sales, and 6 per cent for finance, modern services and consumer services. Companies offering cross-border services could enjoy a tax break as authorities encouraged companies to move up the value chain. Small business could also enjoy lower preferential rates.
Industry commentators called for a cut in tax-rate categories and trimming of the tax burden, leaving more breathing room for businesses struggling in an economic slowdown.
Chinese Academy of Fiscal Sciences vice-dean Wang Chaocai said too many tax rates meant unfairness for businesses.