Journal of Chinese Tax and Policy - Volume 2(1) February 2012

Editorial »


Extending the VAT to Services in China: Special Difficulties and Choices

By Bin Yang

Abstract

The reason for extending the Value Added Tax (VAT) to the services sector in China is not sufficiently powerful. Just looking at the services sector, substituting the sales tax with a VAT gives rise to many difficulties in terms of system design and implementation, and the possible problems may be greater in number than remaining with the status quo. If the neutrality principle where the tax burden remains unchanged is to continue, then broadening the tax scope is less advantageous than not doing so. If the neutrality principle can be deviated from, then there are fewer obstacles to extend the VAT to the transport, construction and real estate industries, but financial services should remain at the status quo, i.e. levying the sales tax.

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The Relationship Between VAT Base Expansion and Intergovernmental Fiscal Relations From the Perspective of the Dual Processes Of Industrialisation and Urbanisation

By Lin Jiang and Sun Hui

Abstract

In this paper, the relationship between VAT base-expansion and intergovernmental financial relations is discussed from the perspective of the dual processes of industrialisation and urbanisation. First, this article theoretically analyses the VAT base-expansion and its real world implications and then evaluates the inter-governmental fiscal relationship. Lastly, an empirical simulation of the effect of base-expansion on local fiscal revenue and expenditure in this dual process is performed. Based on this, conclusions are drawn and relevant policy suggestions are put forward.

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Comments by Researchers from Chinese Government Think-Tanks: The Reforms of the Individual Income Tax Still Have a Long Way to Go

By Dongsheng Jin

Abstract

The Chinese Premier Wen Jiabao hosted the State Council conference on the 1st March (2011), discussing and passing the Draft Individual Income
Tax Law Amendment ('Amendment'). The 'Amendment' outlines changes that should be made as a part of the individual income tax reform suggesting
that based on wage and salary income, the tax brackets should be adjusted and the exemption level increased. The 11th NPC was passed.

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