Article/Jia Kang of China Economic 50 People Forum
In the long run, the replacement of business tax with VAT will restrain the prices of all products and services in the market competition. At the same time, it will improve the cost performance ratio on the supply side through specialized segmentation, which will improve the marginal propensity to consume, and have a positive and beneficial impact on boosting consumption, especially on releasing the consumption demand potential of low and middle-income people.
Replacing business tax with VAT can reduce consumer tax pain Since May 1, 2016, the pilot reform of replacing business tax with value-added tax has been promoted to a comprehensive coverage stage, including the construction industry, the real estate industry, the financial industry and the life service industry. In order to ensure the smooth progress of the reform of replacing business tax with value-added tax, the Ministry of Finance and State Administration of Taxation The Notice on Comprehensively Launching the Pilot Program of Replacing Business Tax with Value Added Tax (CS [2016] No. 36) was formulated and issued, and then the State Administration of Taxation issued a number of announcements on industry management, tax declaration, invoice use, etc., including the Interim Measures for the Administration of Value Added Tax Collection on Self developed Real Estate Projects Sold by Real Estate Development Enterprises.
The fiscal reform plan (CS [2016] No. 36) alone has 39000 words, which is the longest policy text in China's tax history; Nearly 10 million taxpayers were involved, nearly 1.7 times the total number of taxpayers in the pilot program of replacing business tax with value-added tax in the early stage; The annual business tax scale is about 1.9 trillion yuan, accounting for about 80% of the original total business tax revenue.
In this way, after May 1, 2016, China's business tax completely withdrew from the historical stage, and value-added tax achieved full coverage of goods and services. At the same time, this reform has included real estate into the scope of deduction, and the corresponding VAT transformation (from production to consumption) that began in 2004 has also been basically in place.
In addition to the above "double expansion" (expanding the scope of taxation and the scope of deduction), this pilot reform of replacing business tax with value-added tax has two prominent features: First, ensure that the tax burden of all industries is reduced without increasing, and reduce the tax burden of enterprises. In order to ensure that this can be achieved and the tax rate can not be too high, the reform plan has arranged a number of transitional policies, such as introducing the "deduction method" on the basis of the "deduction tax law" (deducting input tax) (implementing a differential tax on tourism, etc.), At the same time, the simple method is applicable to the specific taxable behavior of the general taxpayer (for example, the simple tax method can be applied to the sales of the real estate acquired by the general taxpayer before April 30, 2016).
Second, it was improved on the basis of inheriting the original business tax regulations and the previous pilot scheme of replacing business tax with VAT (CS [2013] No. 106). The reform plan strives to inherit the reasonable contents of the original business tax regulations to the greatest extent, while keeping the framework design of the plan consistent with the original VAT pilot plan (CS [2013] No. 106). For example, most of the interpretations on tax items in Annex 1 of this round of pilot reform plan of replacing business tax with value-added tax inherit the relevant interpretations in the original business tax regulations.
At the same time, the latest economic development is also reflected in the plan, such as separating business services from other service industries as a separate tax item according to the 2001 National Economic Industry Classification Code. The reform plan is bound to have a comprehensive and far-reaching impact on China's economy and society.
Promote supply side structural reform with structural tax cuts, and lead the new normal to hedge downward pressure on the economy
There are different perspectives on structural tax reduction. From the perspective of the whole national tax system, it can be understood as reducing the proportion of indirect taxes and increasing the proportion of direct taxes, and also as reducing the proportion of income or tax burden of certain taxes (it does not exclude the increase of the proportion of income or tax burden of certain taxes, such as resource taxes and environmental taxes). For a specific tax category, it can be understood as tax reduction for certain industries (industries) and certain types of enterprises, such as tax reduction for R&D activities of enterprises and tax reduction for small and micro enterprises.
The replacement of business tax with value-added tax is a structural tax reduction with the widest coverage and greatest strength in recent years, which has a great impact on the economic prosperity and structural evolution. The tax reduction effect of replacing business tax with VAT is reflected in two aspects First, the tax reduction of the pilot taxpayers of replacing business tax with VAT due to the tax system conversion, and second, the tax reduction of the original VAT taxpayers due to the expansion of the deduction scope after replacing business tax with VAT. Therefore, the tax reduction of the pilot reform of replacing business tax with VAT not only involves the pilot taxpayers, but also has an important impact on the original VAT taxpayers, covering a wide range.
According to statistics, as of 2015, China has reduced taxes by 641.2 billion yuan due to the pilot reform of replacing business tax with VAT. Among them, the original VAT taxpayer reduced tax by 327.9 billion yuan and the pilot taxpayer reduced tax by 313.3 billion yuan. This round of comprehensive pilot reform of replacing business tax with VAT is expected to bring another 500 billion yuan of tax cuts. The tax cut felt by enterprises is an incentive for them to be more active in production and operation activities, forming the effect of improving economic prosperity, which is conducive to hedging downward factors and leading the new normal in the process of economic growth decline.
The "structural" characteristics of tax increase and reduction in the reform of business operation are shown in the degree of tax reduction according to the type of industries and enterprises. Before May 2016, the original VAT taxpayers with high investment in productive R&D services had a large tax reduction range. The tax reduction effect was obvious for small and micro enterprises with an annual turnover of less than 5 million yuan, as well as for the emerging business types with fine specialization and subcontracting (because of the "road levy, value-added levy" of VAT The mechanism has replaced the mechanism of "all taxes, all taxes" of business tax).
After May 1, 2016, for those industries with high land and property investment (purchase or lease) and road tolls, their tax burden has decreased significantly. Typical postal express industry integrating warehousing and transportation will significantly reduce taxes in this round of reform.
In particular, The pilot reform of replacing business tax with VAT will greatly reduce the tax burden of small and micro enterprises and new business types with frequent subcontracting. For small and micro enterprises, their profits are meager and their income tax burden is relatively low. Their tax burden is mainly concentrated on turnover tax, or business tax, because the characteristic of business tax is that no matter whether they are profitable or not, there is income when they open the door, and the tax burden is naturally strong.
A survey shows that at least 62% of the taxes paid by individual businesses are turnover taxes (Research Report on Tax Policies for Small and Micro Enterprises, issued by the School of Economics and Management of Southwestern University of Finance and Economics). Although small and micro enterprises have a threshold policy, only small and micro enterprises with an annual turnover of less than 360000 yuan (240000 yuan before October 2014) can enjoy it. After replacing business tax with VAT, the tax burden of small and micro enterprises with annual turnover of 360000 yuan to 5000000 yuan has decreased significantly. For small and micro enterprises that used to apply the 5% business tax rate, their tax burden has decreased from the original 5% to the current 2.9%, a decrease of 42%.
For the emerging business with frequent subcontracting and subcontracting, the characteristics of business tax of "all taxes are levied in full amount" make the tax burden of the project value (price) increase with the turnover without any value-added. Although theoretically, the business tax burden can be eventually transferred to consumers along with the price, it is the supply and demand factors that determine the price in the short term, so it still forms a realistic burden on enterprises in the short term. After the replacement of business tax with VAT, the VAT mechanism of "levying tax at the top and offsetting tax at the bottom" has solved the problem of double taxation well. Therefore, the tax burden of the whole industrial chain of the new type of business is significantly reduced, which will reduce the pain of tax burden for enterprises at any node in the industrial chain.
The current supply side structural reform in China is a systematic engineering innovation based on theoretical reflection, combined with actual national conditions and international experience. Its vision is global and long-term. Its essence is to take reform as the leader, structural optimization as the focus, and institutional innovation to drive management innovation, scientific and technological innovation and other innovation of the entire system. The first is institutional supply. From the previous analysis, we can naturally see the internal logical relationship between the structural tax reduction of replacing business tax with VAT and the supply side structural reform.
First, the replacement of business tax with VAT is an important institutional innovation, which reflects the essence of institutional supply in the supply side structural reform, and the new institutional arrangement is bound to have a profound impact on China's economic and social development; Secondly, tax reduction is one of the main measures of the supply side structural reform. Especially in the current economic downturn and business difficulties, the realization of enterprise tax reduction through replacing business tax with VAT can reduce the operating costs of enterprises in the short term, thus reducing the overall operating costs of the economy, which is conducive to hedging the economic downturn and stabilizing economic growth; Third, the structural characteristics of the difference in the negative range of the increase and decrease of the business tax reform also correspond to the focus of China's structural reform.
The structural reform of China's supply side should be implemented to improve the quality and efficiency of China's supply system, and improve the supply capacity to meet the "upgraded version" of China's consumption. The increase of such supply needs to be achieved through innovation and entrepreneurship, increased R&D investment, and the promotion of specialized segmentation and new business development (e-commerce, express industry, Internet+), The pilot reform of replacing business tax with value-added tax is just to remove the financial and tax mechanism obstacles to the development of such industries (enterprises) and give them reasonable tax cuts. It is self-evident that it plays a role in releasing the potential vitality of the economy, helping supply side structural reform to lead the new normal of the economy.
Promote the specialized subdivision and upgrading of China's economy and industry
The development of the tertiary industry is an important part of China's adjustment of economic structure, and the promotion of fine industrial division is a necessary condition for industrial development. The more refined the division of labor, the more likely the industry is to upgrade and develop. The characteristics of business tax, namely, "levying by all means and levying by all means", have formed institutional obstacles to the development of the tertiary industry. After replacing business tax with value-added tax, the "levying by all means and offsetting by all means" mechanism of value-added tax is "neutral" and "encouraging" to the industrial division of labor, thus eliminating the original mechanism constraints that hinder the development of the tertiary industry and specialized division of labor, In particular, it also includes encouraging large and medium-sized state-owned enterprises to separate the main business from the auxiliary business, pushing the auxiliary business to the market and purchasing auxiliary services from the market, accelerating the division of labor and upgrading of the industry, which will significantly promote the development of the tertiary industry.
Taking the area where the pilot reform of replacing business tax with value-added tax was first carried out as an example, the proportion of the tertiary industry in Shanghai increased from 58% in the year before the reform (2011) to 70% in the first quarter of 2016. The added value of producer services increased from 18% of the city's GDP in 2008 to 40% in 2015, accounting for 60% of the service industry. In 2015, the operating revenue of producer services grew faster than that of services. These achievements are intrinsically related to the institutional environment created by replacing business tax with VAT for the development of the tertiary industry.
The transformation and upgrading of the manufacturing industry is also an important engine to build an upgraded version of China's economy under the new normal. On the one hand, the transformation and upgrading of the manufacturing industry needs to increase R&D investment to enhance competitiveness, on the other hand, it needs to innovate business models, such as promoting the service of the manufacturing industry by means of general integration and general contracting, from selling products to selling designs and services, Then to develop towards the ecosystem of the whole industrial chain. After replacing business tax with VAT, R&D investment and physical investment enjoy the same VAT deduction policy, thus encouraging the manufacturing industry to purchase R&D services and promoting industrial upgrading. At the same time, while accelerating the specialization of labor division, the replacement of business tax with VAT promotes the integrated development of the secondary and tertiary industries and the socialized cooperation of the upstream and downstream associated enterprises of the industrial chain, which removes the bottleneck constraints of the original business tax system for the service-oriented manufacturing industry and the coordinated development of the industrial chain.
More importantly, the replacement of business tax with VAT can improve the market concentration of some industries. Typical example is the construction industry: for many years, the supply channels of raw materials such as sandstone and earthwork in the upstream of the construction industry have been scattered, and the suppliers are mostly small-scale taxpayers or individuals, with small scale and low market concentration. After the replacement of business tax with VAT, the applicable tax rate of the construction industry has increased from 3% to 11%. Upstream enterprises in the construction industry must obtain VAT credits as much as possible to reduce their tax burden.
In this case, in order to provide the downstream construction enterprises with VAT special invoices that can be deducted in a standardized way, the upstream sand and gravel and other construction raw material supply market entities must actively merge and restructure, become bigger and stronger, and improve market concentration. A similar situation will also exist in the delivery and express industries.
Export transformation is also an important part of China's economic restructuring. Its main purpose is to transform from a big country exporting products to a big country exporting services. In the past, because there was no tax rebate mechanism for business tax, service exports could not enjoy the same export tax rebate treatment as product exports. In this way, China's services competed in the international market at a price including tax, which was detrimental to export transformation.
After replacing business tax with VAT, China's service exports will be tax-free or zero tax rate, which will naturally benefit service exports and promote export transformation. In 2013, when replacing business tax with VAT was introduced nationwide, China's service trade export was 210.59 billion yuan, reaching 288.19 billion yuan in 2015, with an average annual growth rate of 17%. In 2015, the export growth of modern service industry was significantly higher than that of all services (9.2%). Among them, the export of telecommunications and computing information services increased by 25% year on year, the export of professional management and consulting services increased by 13.6% year on year, and the export growth of advertising, cultural and entertainment services, and intellectual property fees reached 37.1%, 43.9%, and 64.9% respectively. The above economic structure and industrial upgrading are the result of a variety of factors, but the reform of replacing business tax with value-added tax has played an important role.
Opening the deduction chain is conducive to creating a market environment of fair competition, good credit, strength and expansion
Fair competition is the prerequisite and inevitable requirement for the healthy development of the market economy, which requires the unification of the tax system and policies. After the replacement of business tax with VAT, all industries and enterprises apply a unified VAT system, which opens up the deduction chain within the service industry and between the secondary and tertiary industries. There is no "discrimination" in the era of value-added tax and business tax, when products and goods can be deducted but services cannot be deducted. This has laid the institutional foundation for the formation and improvement of a unified market across the country, It has created a more fair and unified tax environment for industrial development, which is conducive to promoting fair competition among industries (enterprises).
At the same time, the mechanism of "levying VAT at the top and offsetting VAT at the bottom" naturally forms an automatic constraint and supervision mechanism between the buyer and the seller in the market. If the buyer deducts VAT, the seller must pay tax. At the same time, the management of value-added tax invoices is the focus of the "Golden Tax Project". Its use and management requirements are far higher than the original business tax invoices. In the future, the space for using false business tax invoices to offset costs and thus reduce profits and corporate income tax payment has been greatly compressed, which has an important and positive role in promoting the standardization of market actors, plugging tax loopholes, and establishing a good credit environment.
In addition, for micro market entities, large and medium-sized enterprises as well as small and micro enterprises have their own competitive advantages. For example, large and medium-sized enterprises are "general taxpayers" of VAT and can provide customers with special VAT invoices applicable to high tax rates, so they have comparative advantages in market competition. At the same time, small and micro enterprises that apply low tax rates are "small-scale taxpayers". Because of their light tax burden, they will have an advantage in the price of products or services.
Therefore, the replacement of business tax with VAT not only encourages enterprises to become bigger and stronger, but also encourages enterprises to become better and more specialized, which is not only conducive to promoting the "economies of scale" of large and medium-sized enterprises, but also conducive to the entrepreneurship and survival of small and micro enterprises at the "grassroots" level. When small enterprises develop from "small-scale taxpayers" to the critical point of "ordinary taxpayers", the replacement of business tax with VAT will encourage such enterprises to make full efforts to expand, and then obtain stable connections between upstream and downstream customers with standard VAT invoices to further expand their market share.
Force enterprises to standardize internal management and other relevant management system reforms
The standardized management of VAT is much higher than that of business tax, which is caused by the acquirer's efforts to obtain compliance deductible invoices on the one hand, and the high standard management requirements of VAT special invoices such as "RMB" on the other hand. Standardized management has an important impact on the payment of enterprise value-added tax.
Therefore, the business tax reform and growth trend will force enterprises to improve their internal management level, including not only improving their financial management ability, but also the procurement management mode (centralized procurement or decentralized procurement, etc.), supplier selection (general taxpayers or small-scale taxpayers) and customer (enterprise customers or individual customers) management ability, as well as upgrading and transforming IT systems. Therefore, replacing business tax with VAT will force enterprises to improve their internal management efficiency and standardize their behavior, which will undoubtedly improve the overall competitiveness and management efficiency of Chinese enterprises.
At the same time, replacing business tax with VAT can force other relevant management system reforms. Typical examples are the reform of road freight transport management system. With the refinement of industrial division and the development of information technology, the road transport industry has formed an industry development model of "logistics companies light assets+social transport capacity". Millions or tens of millions of manufacturing or commercial cargo owners outsource their transportation business to third-party logistics companies, and third-party logistics operates in an asset light mode, that is, through logistics information intermediary service companies, the actual cargo transportation business is subcontracted to individual (social) vehicles to finally complete the cargo transportation task.
In other words, individual heavy trucks operate independently, logistics companies use them randomly, and a dynamic combination is formed between social transport capacity and transport demand. In this process, the cargo owner is the demander of transportation, and the logistics company, information intermediary and individual truck are the suppliers of logistics business. The logistics company directly grasps the transportation demand information, and is also the demander of the actual transportation business. Through the information intermediary, the actual transportation business is subcontracted to individual trucks.
This operation mode can meet the dynamic adjustment between the demand and supply of transport capacity and realize the optimal allocation of resources in the road transport industry. However, the current road transport supervision mode still issues road transport licenses based on "assets" (the number of vehicles and tonnage). Therefore, in order to obtain road transport licenses, individuals must attach their transport vehicles to some "affiliated companies".
At the same time, in the era of business tax, the old collection and management mode of "controlling tickets by vehicles and controlling taxes by tickets" has given "affiliated (transportation) companies" greater rights and benefits, namely, the right to receive and purchase transportation invoices and enjoy the right of local governments to promote the settlement of logistics enterprises. The consequence is that logistics enterprises with actual business can't get invoices (including individual truck owners, who have been doing business all over the country for many years, and basically can't get invoices at the vehicle registration place according to the tax law), and invoices received by "affiliated (transportation) companies" can also be "resold" by charging a certain handling fee For enterprises that need invoice offset cost.
After the replacement of business tax with VAT, if not changed, the chaos in the road transport industry will become more prominent, which will place relevant stakeholders (logistics companies, truck self-employed businesses, tax authorities) in an illegal situation. Therefore, the business reform and increase trend will force the reform of China's road transport management system to comply with the requirements of industry development and the trend of reducing logistics costs.
Improve the cost performance ratio of output, reduce the tax burden of consumers in the end result link, boost consumption and expand domestic demand
In terms of theoretical investigation, VAT can also be considered as a kind of consumption tax, that is, through the transfer of prices layer by layer, consumers will ultimately bear the tax burden. Of course, this is not contradictory to the tax burden borne by enterprises in the short term, because the price is determined by supply and demand in the short term, so the changes in tax burden before and after the reform can not be fully transferred out through the price in the short term.
However, in the long run, the replacement of business tax with VAT has a global significance in boosting consumption First of all, VAT is generally collected. Accordingly, the replacement of business tax with VAT has an impact on the tax burden of all products (services) and thus on the prices of all products (services), which will be reflected in the medium and long term; Secondly, the comprehensive replacement of business tax with value-added tax is a common tax reduction. Accordingly, in the long run, it will restrain the prices of all products (services) in the market competition. At the same time, it will also improve the cost performance ratio of the supply side by specialized segmentation, which will increase the marginal propensity to consume, It will have a positive and beneficial impact on boosting consumption, especially on releasing the consumption demand potential of low-income people. These are not only conducive to hedging the economic downturn to a certain extent, but also enable the majority of low - and middle-income people to share more reform dividends.
Of course, the positive impact of replacing business tax with VAT needs to be gradually released and manifested through the dynamic optimization of institutional policies and the timely adjustment of business models by market players. The reform of replacing business tax with VAT still has room for reform in the future, such as the simplification of tax rates, the improvement of the deduction system, and the exploration and refinement of the group tax system. There is no doubt that the reform of replacing business tax with value-added tax will have a positive, comprehensive and far-reaching impact on China's economic and social development by combining stable growth, structural adjustment and people's well-being.
(The author of this article introduces: Director of the Institute of Financial Science, Ministry of Finance, researcher, doctoral supervisor.)
