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Can consumers expect high of value-added tax?

(Xinhua)

10:08, October 31, 2011

BEIJING, Oct. 31 (Xinhuanet) -- Who will benefit the most from China's newly passed value-added tax reform? Consumers, it is really hard to say that.

The State Council last week approved a pilot program to replace the turnover tax with a value-added tax (VAT) in Shanghai from Jan. 1, 2012.

This pilot program would probably be the first step in the adjustment of China's taxation structure in the coming years, noted Lu Zhengwei, chief economist at Industrial Bank.

It aims to diminish double taxation and reduce tax burdens for the service sector, said Jia Kang, director of the Research Institute for Fiscal Science under the Ministry of Finance.

It is key to a bigger overhaul of China's tax regime that is aimed at producing a fairer economic system.

The turnover tax refers to a tax on the gross revenue of a business, while a VAT refers to a tax levied on the difference between a commodity's price before taxes and its cost of production.

According to the Ministry of Finance, the government collected 7.13 trillion yuan in taxes during the first nine months of 2011, of which the VAT accounted for 1.82 trillion yuan.

The value-added tax and business tax were the No. 1 and No. 4 top earners in China's tax revenues in 2010. The value-added tax accounted for 29 percent and business tax, 15 percent.

Under the reform, VAT rates will be lowered from current 17 percent and 13percent to 11percent and 6 percent.


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