YANG Bin，etc：The Realistic Choice of Replacing Business Tax with VAT in China's Financial Sector

Abstract：It's a global problem to levy the standard VAT on financial services.Due to the infeasibility of credit input VAT by invoice, it is infeasible to build a standard VAT system in this field.If the government has to levy VAT on finance services, a practical choice is to adopt account book method, which is to levy the specified tax base through the account book by single-rate.Meanwhile, it is not allowed to credit input VAT in this method.This kind of VAT is in effect Business Tax.Because of government authorized monopoly, there is no so-called over-taxation in China's financial sector.As a result, the reform of “Replacing Business Tax with VAT” in finance should proceed without changing the original tax burden.After having conducted abundant research and statistical analyses, as for the VAT rate, 9% is advised, and the original way of levying tax on the full amount of value is suggested to be supplanted with a new way of levying tax on added value, with a slightly raising tax ratio, to reduce the tax base.

Key words： Replacing Business Tax with VAT    Financial Services    Reform of Taxation System    VAT

source:Finance & Trade Economics ,No.6,2015