China to Further Widen VAT Reform

Value-added tax reform in some pilot regions will be expanded to more areas as burdens on Chinese business have been reduced, the Ministry of Finance said Friday.

As of Friday, the reform, replacing the turnover tax with a value-added duty in transport and some service sectors, has reduced taxes of over 40 billion yuan (US$6.4 billion) for more than 1 million taxpayers in 12 pilot regions, according to a conference held by the ministry.

The ministry said the reform had reduced burdens on lower taxpayers by an average of 40 percent.

Turnover tax refers to a levy on the gross revenue of a business. VAT refers to a tax levied on the difference between a commodity's price before taxes and its cost of production.

China introduced the reform in Shanghai last year to avoid double taxation. The program was later expanded to another 11 regions, including Beijing, Tianjin and Shenzhen.

The ministry said it will bring the reform in transport and some modern services nationwide, and actively study the possibility of extending the change to more sectors.