Source: CCTV.com

11-12-2008 09:32

Special Report:   Global Financial Crisis

China has announced it will spread its value-added tax regime to all industries nationwide, starting January 1st. Reforming the value-added tax system has been in discussions for many years in China.

China has announced it will spread its value-added tax regime to all industries nationwide, starting January 1st.

The value-added tax refers to the tax that is collected on the incremental value created by additional work on a product. There are two kinds of value-added tax in China. The production value-added tax is levied on the cost of a product minus the cost of the raw materials used. The consumption value-added tax is levied on the cost of a product less the cost of the raw material and fixed assets used. The reform aims to change the production VAT into a consumption VAT.

Jia Kang, Director of Research Inst. of Fiscal Science of Ministry of Finance said "This means enterprises can benefit more, since the tax paid on equipment that was bought for investment purposes can be deducted now."

Jia Kang says the reform of the value-added tax in China will help manufacturers overcome their difficulties in the global financial crisis, as it reduces investment costs. The reforms that have been in discussion for many years were not pushed forward earlier, because of pressure from the country's overheated economy.

Jia Kang said "The Chinese economy is not overheated now. But, instead, we will keep it from sliding too fast. So the macro-environment allows a change in the value-added tax in China."

Jia Kang says the 120-billion-yuan in resultant tax savings will help companies increase both profits and incomes, and thus boost investment and consumption in China.

 

Editor:Xiong Qu