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China cut 1.7 trillion RMB of tax in last 5 years thanks to reform

By Sun Wenyu (People's Daily Online)    17:02, October 12, 2017

A taxpayer handles transactions on a machine. (File photo)

China has cut 1.7 trillion ($258 billion) RMB of tax in the last 5 years, according to the latest official statistics, Xinhua News Agency reported on Oct. 11.

Fiscal data showed that the nationwide value-added tax (VAT) reform implemented since May 2016 has reduced the tax burden for all the 26 segmented industries.

In the first seven months of 2017, the four major construction, property, finance, and consumer service industries have paid a total VAT of 756.8 billion RMB, saving 140.4 billion RMB for these sectors.

In addition to the tax cut, the reform has spurred entrepreneurial activities. More than 1.53 million new enterprises in the four major industries have been established over the past year.

“The deduction of VAT not only relieves tax payers’ obligation, but also lowers the cost of enterprises,” said Zhu Qing, a professor at Renmin University, adding that the VAT reform is an important measure to implement the supply-side structural reform needed to promote mass entrepreneurship and innovation.

“China’s VAT reform has achieved success both in policies and management,” remarked Jeffrey Owens, director of the Global Tax Policy Center of Vienna University of Economics and Business.

VAT is China’s largest tax and accounts for more than 30% of the total tax revenue. Business tax, which involves a number of industries, had a history of 66 years in China. As a result, the reform has become the largest tax overhaul in China’s history.

Director Vitor Gaspar of the Fiscal Affairs Department of International Monetary Fund said that tax capability is a fundamental pillar of a country’s governance. He believes China’s deepening tax reform will definitely improve the country’s fiscal and taxation system, as well as modernize its governance. 

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