China’s latest efforts to expand the pilot scheme for value-added tax (VAT) reform nationwide have resulted in a tax reduction of 13.01 billion yuan (2.1 billion U.S. dollars) so far, the State Administration of Taxation announced Thursday.
The expansion of VAT reform, which was implemented as part of China’s structural tax cuts, has included replacing the turnover tax with a VAT in the transportation industry and six service sectors since Aug. 1 of this year.
VAT refers to a tax levied on the difference between a commodity’s price before taxes and its production cost, while turnover tax refers to a levy on a business’s gross revenues.
The widening VAT reform has benefited 2.22 million tax payers so far, with the number of tax payers in the newly added sectors reaching 762,600, according to the administration.
VAT reform has brought benefits to the country’s economic growth as well as company restructuring, according to Bai Jingming, deputy director of the financial sciences institute at the Finance Ministry.
He points out that currently the service industry directly benefits from the reform, but in the long run, the move will promote development of the manufacturing industry as reforms expand to more sectors.