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China has re­placed all busi­ness tax with value-added tax ( VAT) af­ter ex­tend­ing the pol­icy to cover the con­struc­tion, real es­tate, fi nance and con­sumer ser­vices sec­tors. They were the last four sec­tors still taxed based on their rev­enue. VAT refers to a tax levied on the dif­fer­ence be­tween a com­mod­ity’s price, be­fore taxes and its pro­duc­tion cost. Rev­enue tax refers to a levy on a busi­ness’s gross rev­enues. The ex­pan­sion of the VAT scheme is ex­pected to ease tax bur­dens by more than US$76.9bil­lion (F$159.45bn) this year.

China’s ser­vice sec­tor is in­creas­ingly pick­ing up the slack of man­u­fac­tur­ing as the world’s sec­ond- Has been saved in taxes for busi­nesses from the the VAT scheme over four-year pe­riod.

largest econ­omy is shift­ing to­wards a more sus­tain­able growth driven chiefly by con­sumer de­mand. Ex­pand­ing VAT to more ser­vice sec­tors is also part of the sup­ply­side struc­tural re­forms au­thor­i­ties have been promis­ing since last year to ad­dress the struc­tural im­bal­ances in the Chi­nese econ­omy. “We now have to pay an 11-per cent value-added tax com­pared with 5.5 per cent busi­ness tax in the past. It ap­peared that the tax rate had in­creased but the base on which the tax is col­lected has shrank so ul­ti­mately our tax bur­den is re­duced,” said a trea­surer with a con­struc­tion firm in the north­ern Chi­nese city Tian­jin. The VAT scheme first started in 2012 as a pi­lot pro­gramme in Shang­hai, cov­er­ing a num­ber of ser­vices in­clud­ing trans­porta­tion, IT, and lo­gis­tics. It was later ex­panded na­tion­wide and to cover other busi­nesses.

Over the past four years, the VAT scheme has saved US$98.99bn (F$206.95bn) in taxes for busi­nesses. Xin­hua

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