The key points of the 14th Five-Year Plan of VAT reform: complete the legislation, and combine three levels of tax rates
As the largest tax category in China, the reform of value-added tax has been unprecedented. In recent years, tax cuts of more than 3 trillion yuan have not only reduced the burden on enterprises, but the tax system has also been further improved.
Currently, the central government is studying and formulating the fourteenth five-year plan for national economic and social development (hereinafter referred to as the "14th Five-Year Plan").
The value-added tax reform during the "14th Five-Year Plan" period not only affects the tax burden of tens of millions of enterprises, but also affects the modernization process of China's tax system and even the country's governance capabilities, so it has attracted much attention.
A number of fiscal and taxation experts told China Business News that the value-added tax that has already started the legislative process will definitely be completed during the "14th Five-Year Plan" period, and reforms will also proceed simultaneously.
Among them, the three-tier VAT rates of 6%, 9%, and 13% will be reduced in the direction of the two levels. The burden reduction is still the general trend, but it is more difficult; the value-added tax refund will be further expanded, and the huge amount of tax will be gradually involved. The input deduction of value-added tax is also expected to increase. Whether bank loan interest can be allowed to deduct is a big issue; a wide range of preferential tax policies should be further cleaned up to give full play to the “neutral” advantage of value-added tax to reduce economic distortion.
Over 3 trillion yuan to reduce the burden is obvious
Since the change from business tax to value-added tax in 2012, value-added tax has been the most frequent type of tax in the tax reform.
In 2016, the business tax reform to value-added tax was fully implemented. Business tax bid farewell to the historical stage, eliminated repeated taxation, and realized full coverage of goods and services by value-added tax.
Immediately afterwards, the deepening reform of value-added tax was launched, and the four-tier tax rate was finally simplified and significantly reduced to three-tier 6%, 9%, and 13%; input value-added tax deduction increased, real estate, passenger transportation, etc. were included; corporate value-added tax was retained for tax credit The incremental part allows partial tax refunds.
In addition, after the VAT reform, the ratio of the central and local value-added tax revenue has been changed from 75:25 to 50:50, which is also conducive to the smooth operation of local finances.
"The value-added tax reform is the biggest move in China's tax system reform in recent years. Since the VAT reform in 2012 (until 2019), the total value-added tax reduction has reached 3.2 trillion yuan. The VAT reform has reversed the increase in my country's macro tax burden. The momentum has reduced the burden on enterprises, increased profits, and promoted the upgrading of the industrial structure." Tian Zhiwei, deputy dean of the Institute of Public Policy and Governance, Shanghai University of Finance and Economics, told China Business News.
Shandong Levima New Material Technology Co., Ltd. is an enterprise focusing on the production, R&D and sales of advanced polymer materials and specialty chemicals.
According to Peng Jie, the company's financial officer, benefiting from the value-added tax reform in recent years, the company paid about 3.46 million yuan in value-added tax in 2018, reduced taxes by 33.69 million yuan in 2019, and reduced taxes by about 30.48 million yuan from January to August 2020.
Li Xuhong, director of the Institute of Fiscal and Tax Policies and Application of Beijing National Accounting Institute, told China Business News that the value-added tax reform during the "13th Five-Year Plan" period is no matter whether it is optimizing my country's tax system structure, consolidating the realization of the tax generation system, or reducing the tax burden of enterprises. It has made important contributions to stimulating the vitality of market players and optimizing the business environment.
Although the new measures for the VAT reform during the 14th Five-Year Plan period have not been determined, experts generally believe that the VAT legislation can be completed.
The current value-added tax still exists in the form of the Provisional Regulations of the State Council. In order to implement the legal principles of taxation, the value-added tax has already started the legislative process. At the end of 2019, the draft of the value-added tax law was made public.
Shi Wenwen, a professor at the China University of Political Science and Law, analyzed by China Business News reporters that in order to implement the principle of legal taxation, the current National People's Congress is expected to complete the value-added tax legislation before the re-election in 2023.
However, the VAT legislation does not mean the "freezing" of the reform, the two need to be promoted in concert.
Regardless of whether it is legislation or reform, the purpose of the two advances is to build a fair and standardized modern value-added tax system, that is, to reduce tax rates, smooth deductions, give full play to the "neutral" advantages of value-added tax, and reduce economic interference.
Li Xuhong believes that value-added tax legislation should be completed during the "14th Five-Year Plan" period.
At the same time, in the context of economic digitization, more new forms and business formats will emerge. Therefore, VAT needs to be adjusted in terms of taxation objects and rules to avoid double taxation to adapt to changes in the environment; at the same time, it is also necessary to consider: With the improvement of national governance and the advancement of modern technology for collection and management, how to reduce the management cost of value-added tax to promote the reduction of transaction costs.
Tax rate reduction in the direction of burden reduction is difficult
The State Council has clarified that the direction of the consolidation of the value-added tax rate is three and two. However, the current three-tier tax rate of 6%, 9%, and 13% is still maintained in the draft of the VAT law issued at the end of the year.
Whether the value-added tax rate will continue to be lowered in the next five years, and whether the three-tier tax rate will be merged into two, has attracted market attention and is also a core issue in the next step of legislation.
In recent years of value-added tax reduction measures, a major focus is the simplification and reduction of tax rates.
In 2017, the value-added tax rate was reduced from four levels (6%, 11%, 13%, 17%) to three levels (6%, 11%, 17%). In 2018, the 17% tax rate was reduced to 16% and 11%. Decrease to 10%, and further to 13% and 9% in 2019. The current value-added tax rate is maintained at three levels (6%, 9%, 13%).
In the process of tax rate simplification and reduction, the state has introduced some temporary preferential policies in order to insist that the tax burden of the industry is only reduced but not increased.
For example, taxpayers in the life service industry are allowed to add 15% of the current deductible input tax to deduct the tax payable.
The purpose of this move is to increase the input deduction to ensure that the tax burden does not increase.
Li Xuhong believes that according to the international development trend of value-added tax, it is necessary to reduce the difference in tax rate in order to play its neutral function. At present, the countries that retain the two tax rates still account for the majority; at the same time, more and more countries adopt modern value-added tax systems. Preference to increase the standard tax rate in order to avoid inhibiting economic behavior.
Shi Wenwen stated that a major goal of the optimization of my country's tax system structure is to reduce the proportion of indirect taxes, and value-added tax is the largest indirect tax, and the proportion of tax revenue should be appropriately reduced. Tax reduction is still a major direction for future value-added reform.
The way to reduce value-added tax is nothing more than lowering the tax rate or increasing the deduction to reduce the tax base.
From the current point of view, the basic value-added tax rate of 13% still has one or two percentage points to fall in the future.
However, it is very complicated to condense the three tax rates into two. If the conditions are not met, they may not be introduced in the "14th Five-Year Plan".
Tian Zhiwei believes that the current fiscal revenue pressure is relatively high and the VAT burden reduction space is limited. If the economy improves during the 14th Five-Year Plan period and fiscal revenue increases, it is possible to continue to reduce tax rates to achieve degeneration.
Of course, if the economy is overheating, it is not ruled out to achieve tax rate reduction through structural tax increases.
Pay attention to tax deductions and tax refunds
In the value-added tax reduction policy, it is also important to reduce the tax base by increasing the input deduction to achieve tax reduction.
For example, after the comprehensive implementation of the VAT reform, my country allowed real estate to be included in the input deduction scope for the first time. Last year, the input tax paid by real estate was allowed to be deducted from two-year deductions to one-off full deductions. Increase in input tax deduction and reduce tax burden.
Last year, domestic passenger transportation services were also allowed to be tax deductible.
Shi Zhengwen believes that the reason for the heavier value-added tax burden of some enterprises is insufficient deduction. The next step of the value-added tax reform needs to improve the value-added tax deduction system, and this impact is no less than the reduction of tax rate.
For example, during the "14th Five-Year Plan" period, it is possible to introduce bank loan interest into input tax, allowing deductions.
The current high financing cost of the real economy is mainly due to the fact that loan interest is not allowed to be tax deductible. This is not in line with the basic principles of value-added tax. If the impact on fiscal revenue is not considered, this reform is expected to be launched.
Tian Zhiwei also believes that it is possible to allow loan interest tax deductions in the future.
In addition, in order to build an international financial center, it is possible to consider giving zero or tax exemption to the export value-added tax of financial services.
Li Xuhong said that from the perspective of the integrity of the value-added tax chain, in principle, complete deductions between upstream and downstream should be achieved, but there may be some restrictions based on policy adjustments and other factors, but from a general perspective, it should be mainly used The negative list method excludes some items that cannot be deducted, and the remaining items can be deducted.
However, according to the survey, the inability to achieve complete deductions among market entities is not entirely due to the impact of the tax system, and a considerable part of it comes from the need to improve the market environment.
When the current output tax of the VAT taxpayer is not enough to make up the input tax, the difference is called the retained tax.
Before 2018, my country’s retained value-added tax credits were not refunded in the current period, and they were carried forward to the next period for deductions. This is equivalent to the company’s prepayment of taxes that occupies corporate cash flow and increases corporate burdens.
In order to reduce the burden on enterprises, in 2018, my country began to refund part of the value-added tax refund in some advanced manufacturing industries and other industries; in 2019, it tried to implement a tax refund system for the end-of-term value-added tax credit, and eligible enterprises can apply to the competent tax authority for refund Incremental tax credit.
Li Xuhong said that the VAT credit refund system has played a positive role in enhancing the neutrality of VAT, reducing the burden on taxpayers, optimizing the business environment, and improving the tax system. At the same time, it is also part of my country's tax and fee reduction policies. A tax policy that enterprises generally have a strong sense of.
It should also be noted that my country’s VAT credit tax rebate system has not fully realized tax rebates, and some funds are still deposited. Some may be based on historical reasons. The existing tax credits have not yet been fully refunded, and some may be based on Due to local financial resources, full tax rebate cannot be achieved, so further optimization is still necessary.
Liang Ji, a researcher at the Chinese Academy of Fiscal Sciences, believes that in the next step, the pilot program should be continued to expand the value-added tax refund, and the taxpayer's remaining tax credit should be gradually refunded in batches. At the same time, it is necessary to deepen the reform of the value-added tax revenue division.
"The key point that needs to be broken through for tax refunds is the distribution of fiscal revenues. Where should the tax refunds be paid for cross-regional business activities? What is the proportion of tax refunds borne by each region? All are the coordination issues of income distribution." Li Xuhong said .
Tian Zhiwei believes that the general trend of future reforms is to provide a full refund of the value-added tax credit, which includes the stock tax amount. However, due to the large scale of this part of the tax amount, once the tax refund is allowed, the impact on the current fiscal revenue will be too large. Therefore, the incremental tax refund will be allowed in the future. , And then gradually expand to the tax rebate of the stock tax.
Author: Chen Yi-Journal