Jiangsu Reflects "Replacing Business Tax with VAT" to Promote Economic Structure Adjustment
Initial achievements in industrial transformation and upgrading
The pilot project of "replacing business tax with value-added tax" in Jiangsu Province was officially implemented on October 1, 2012. Over the nine months of the pilot project, the total tax reduction was 9.554 billion yuan, with 96.61% of the tax reduction. The pilot program of "replacing business tax with value-added tax" has accelerated the development of the service industry, especially the modern service industry, and has achieved initial results in promoting economic restructuring and industrial transformation and upgrading.
1、 The industrial transformation and upgrading have been accelerated significantly
（1） Promote the refinement of industrial division of labor. The "replacement of business tax with VAT" has systematically solved the problem of double taxation of labor and goods, created a favorable tax system environment for the coordinated development of specialization of the secondary and tertiary industries, and accelerated the separation of producer services from manufacturing. Since the pilot project, large manufacturing enterprises in Jiangsu Province, such as Longteng Special Steel, XCMG, Tianshili Diyi Pharmaceutical, Nanjing Chenguang, Feida Carbon, have or are implementing the separation of main and auxiliary industries.
（2） Rapid transformation of traditional industries. "Replacing business tax with VAT" not only promotes the upgrading of traditional manufacturing technology, but also boosts the confidence of enterprises to update equipment. In the nine months since the pilot project, the general taxpayers in the pilot industry accounted for 6.58% of the general taxpayers in the province, but the equipment procurement accounted for 22.58%, significantly accelerating the investment growth. In industries with large scale of equipment deduction, such as R&D and technology, logistics assistance, and tangible movable property leasing, the tax deduction amount of fixed assets accounted for 73% of all pilot taxpayers.
（3） The modern service industry has grown rapidly. The tax burden of cultural and creative service enterprises focusing on design services, trademark copyright transfer, exhibition, etc. has dropped significantly, driving the rapid growth of cultural and creative industries. By the end of June, general taxpayers in pilot industries across the province had reduced tax by 3.015 billion yuan, 1.11 percentage points lower than the original business tax burden, and cultural and creative taxpayers more than doubled from the initial pilot period. In June this year, the province's cultural and creative service revenue was 6.19 billion yuan, an increase of 76.01% over October 2012.
2、 The vitality of enterprise development has been significantly enhanced
（1） The willingness of new enterprises has increased significantly. By the end of June this year, 84700 new taxpayers had been set up in pilot industries across the province, an increase of 43.43% over the initial stage of the pilot, and 32.94 percentage points higher than that of taxpayers in non pilot industries across the province. Among the newly established enterprises, the number of taxpayers in the modern service industry increased significantly, and the growth rates of R&D and technology, cultural creativity, tangible movable property leasing, authentication consulting, and logistics auxiliary services reached 113.3%, 61.8%, 51.55%, 44.40%, and 29.97% respectively.
（2） The profitability of enterprises has been significantly enhanced. The "serial tax reduction effect" and "innovation incentive effect" of "replacing business tax with value-added tax" encourage enterprises to develop high-tech. Take Suzhou Academy of Electrical Apparatus Science Co., Ltd. as an example. This high-tech enterprise engaged in testing services for power equipment has invested more than billion yuan in testing equipment every year in the past. From October 2012 to February 2013, the amount of input tax credit increased due to the purchase of fixed assets reached 33.46 million yuan, with an average monthly increase of nearly 40 million yuan in equipment investment, an average increase of 42% over the nine months before the pilot project. The enterprise plans to invest 4 billion yuan in the next few years to build a world-class brand testing agency.
（3） The management ability of enterprises has been significantly enhanced. The "replacement of business tax with value-added tax" has prompted many enterprises to take the initiative to set up or outsource productive services, expand their business coverage and reduce overall operating costs. Take Longteng Special Steel as an example. In the past, the annual logistics cost of the enterprise was about 200 million yuan. After the "replacement of business tax with value-added tax", the enterprise established a professional transportation company. It is estimated that in 2013, the operating income will reach 100 million yuan, and the tax reduction will reach 6 million yuan. The logistics cost of the enterprise will be greatly reduced.
3、 The international business environment has been significantly optimized
（1） The export of services was expanded. Taking Aili (Kunshan) Co., Ltd., which mainly provides R&D services overseas, as an example, after "replacing business tax with VAT", the enterprise can deduct more than 1 million yuan of tax annually, effectively attracting overseas parent companies to subcontract more R&D services into China. Since the "replacement of business tax with value-added tax", 780 new foreign-funded enterprises have been established in the province, up 16.71% from the beginning of the pilot project, most of which are modern service industries such as R&D and technical services, authentication and consulting services.
（2） It has strengthened the competitiveness of the international service industry market. Taking Taicang Port Container Shipping Co., Ltd. as an example, since the pilot project, the enterprise has declared a total sales income of 56.32 million yuan, all of which are tax exempt income. The tax exemption, offset and refund have passed the audit of 6.2 million yuan. The enterprise's operating costs have been significantly reduced, and the competitiveness of the overseas transportation industry has been significantly improved.
