Changes aimed at reducing commercial tax burdens

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Under the tax reforms, domestic companies will now pay profits tax instead of sales tax, reducing their tax burdens. A pilot scheme has already been running in Shanghai for more than a year.

BizAsia’s Yin Hang has been following the impact of the pilot, and joins me now in the studio.

Q: Yin Hang, tell us about some of the initiatives and benefits of the reforms:

A: This is an attempt to get rid of China’s notorious double taxation problem for businesses. The central government introduced its pilot program in Shanghai last year, to replace the business tax in sectors such as transport and services.

So value-added tax is now only charged on the added value of each link in the production chain. The plan was later extended to another 11 regions, including Beijing, Tianjin, and Shenzhen.

Now, starting today, the scheme is being rolled out across the country. The benefits are clear. In the areas where the pilot was operating, the first five months of 2013 saw business tax burdens fall by 40.6 billion yuan, that’s around 6.6 billion US dollars.

This drop in tax benefited around 1.3 million businesses in the nine regions that first piloted the scheme. China’s central government also says it will extend the reforms "at a due time" to railway transport, postal services and telecommunications industries.

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