Simplified tax regime is on the horizon

China will simplify its tax regime and push forward legislation to improve the value-added tax system, the head of the nation's top taxation authority says.

"China will combine the current four tax tiers into three to make the tax collecting regime more efficient," Wang Jun, the head of the State Administration of Taxation, said in Paris during the fourth meeting of the OECD Global Forum on Value-Added Tax.

Legislation on the value-added tax will be launched next year, according to Wang.

"Future reform will ensure that industries in all sectors will not face a higher tax burden," said Wang, citing Premier Li Keqiang's comment during the two sessions in March that Beijing would put improving the system high on its agenda to lower the tax burden and boost economic growth.

Taxes are expected to be reduced by a total of 680 billion yuan ($98.9 billion; 92.6 billion euros; 78.7 billion) by the end of April, Wang said.

China launched the value-added tax reform in 2012, and it was extended to the construction, real estate, finance and consumer services sectors in May last year.

The reform aims to replace standard business income taxes with VAT, a consumption tax placed on a product whenever value is added at a stage of production and at final sale.

Although 2 percent of corporate taxpayers still face a higher tax burden after implementing value-added tax reform, mainly due to failing to get invoices for tax refunds or a lack of knowledge, the business tax system should not be blamed for the burden on these enterprises, according to Li Wanfu, director of the Taxation Science Institute of the administration.

Zhao Xiao, an economics professor at the University of Science and Technology Beijing, says the key to reform should not be a focus on restructuring the tax structure.

Zhao says China can borrow experience from developed countries. "Increasing the proportion of direct tax and reducing the proportion of indirect tax will improve fairness in paying tax," says Zhao, adding that "efforts such as value-added tax reform are one key part to improve the structure, but it takes time to show effects."

wangyanfei@chinadaily.com.cn

(China Daily European Weekly 04/14/2017 page3)