China to conduct large-scale taxation system reform

17:01, August 25, 2010      

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China plans to reform its taxation system by improving the value-added tax and sales tax systems, expanding the scope of the value-added tax, giving overall consideration to the tax burden on companies, carrying out the reform in resource taxes and promoting the reform of the property tax and personal income tax, Xu Lin, director of the Department of Fiscal and Financial Affairs under the National Development and Reform Commission, said on Aug. 24.

"We have been conducting research into the property tax, which will be a stable main component of the tax revenue of local governments," Xu said.

In addition, the resource tax will also go to local governments so the revenue of local governments in central and western regions, which are rich in natural resources, will be further increased after the implementation of the resource tax reform.

Xu said in order to increase the share of the service sector in the national economy, China will further improve the value-added tax and sales tax systems.

"Currently, the value-added tax is only levied on the industrial sector, while the sales tax is levied on the service sector. Because the value-added tax enjoys various degrees of deductions at each stage of production, while the sales tax does not, the service sector is actually bearing a heavier tax burden than the industrial sector," he said. "China may also introduce an environmental tax and social security tax."

The country is faced with great pressure from huge social security spending, and the reform of the pension system needs to be further promoted, he said.

"We are studying ways of changing the social security fee to social security tax," which will help build a unified national social security system, Xu said.

As for personal income tax reform, Xu said there are still many problems with China's existing personal income tax system. Currently, this tax is simply deducted from a worker's salary by his or her company, but the number of breadwinners in a family is not taken into consideration, which has made some workers pay an overly high personal income tax.

By People's Daily Online


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