A Study of Value-added Tax in Mainland China

• Main Authors: Huang Huei-Ling, 黃惠玲
• Other Authors: Jien-Jong Guo
• Format: Others
• Language: zh-TW
• Published: 2003
• Online Access: http://ndltd.ncl.edu.tw/handle/52777443009202010387

碩士 === 淡江大學 === 大陸研究所碩士在職專班 === 91 === Several domestic factors have been driving industries in Taiwan to invest and set up branches in China, including increased environmental regulations and awareness, increased labor cost, industries in transition, political instability and so on. Seeking a better environment where business can be further expanded and facilitated, industries in Taiwan have realized that such trend is inevitable if sustainable development for the industry is to be achieved. With economic liberalization and reforms, China has attracted an avalanche of Taiwanese and foreign investors with its low labor cost, huge domestic market, low land acquisition cost, and exemptions on land tax and other levies. However, the regulatory framework and environment for business operation in China are less matured than advanced countries, so investors run the risk of facing various instability and unexpected costs. Therefore, investors should carefully assess how their rights and interests can be protected in such a different business setting. Adoption of “socialist market economy” was proposed at the 14th National Congress of Communist Party of China in October, 1992; revisions of constitution to “implement socialist market economy” were approved in the 1st meeting of the 8th National People''s Congress of the People''s Republic of China in spring, 1993. Moreover, “decisions on establishing a socialist market mechanism for economy in China”—a demonstration of China’s economic reforms and visions— were approved in the Third Plenary Session of the 14th Congress of CPC in November, 1993. Tax law reforms were therefore proposed based on the principles of unified tax law, tax equality, taxation system simplification, and reasonable decentralization. Turnover tax system which focuses on value-added tax (VAT) was also adopted; consumption tax is levied on a minority of products and business tax on a majority of products. This research focuses on the following issues regarding “value-added tax” in China: 1. Evolution and principles of VAT in China. 2. Analysis of VAT’s role in China’s financial and economic system, and the impact that VAT reform exercises on China’s overall tax law reform from both macro and micro-economic perspectives. 3. Addressing problems China faces over its VAT system and discussing how VAT system is influenced by China’s accession into WTO. 4. Harmonization of China’s VAT system and the global trend. Guidelines to reform China’s current VAT system based on inspection and collection of VAT in other countries. Apart from analysis of the underlying problems which currently plaque China’s VAT system, the author proposes the following guidelines for VAT reforms: 1. Expand value-added taxation to industries closely related to products (貨物) in order to include related labor service in the taxation scope. 2. In expanding scope of value-added taxation, include fixed assets into the VAT taxation chain in different phases to maintain a horizontal connection. Learn from experiences of other countries. Consider China’s current and future financial needs and taxation management capability. 3. Take care of local financial needs when expanding scope of VAT taxation. Consider benefits to macro-economy in terms of transition between VAT and business tax. 4. Formulate reasonable standards to differentiate general tax payers from small-scale tax payers to advance VAT mechanism. 5. Streamline export tax return procedures in order to avoid export tax reduction between the import link and middle link. Upgrade management of export tax return to minimize export tax evasion and ensure connection between each VAT taxation link. 6. Formulate national standarsd for tax return review procedure, inspection procedure, and calculation procedure to increase the efficiency of export tax return administration.