China Vat

This book clearly chronicles the evolution of Chinese VAT regulations, with a particular focus on the reforms of recent years. Covering all the provisions of the laws related to VAT, it also provides examples and implementation instructions. Practically structured and easy to consult, it allows readers to quickly find answers to questions that may arise in the course of their work. As such, the book is a valuable tool for accountants, advisors, lawyers, public officials and anyone working in the sector.

This guide is a practical overview for the international businessman to understand the rules, regulations and management issues regarding taxes in China. It is written very much from practical experience. We will help you to understand the implications of what can initially appear be a complicated and contradictory subject. This book tells you the basics of what you need to know, and point you at the structures you should use to enable your China business to be both in compliance and as tax efficient as possible.

Value Added Tax (VAT; also known as Goods and Services Tax, under the acronym GST in a number of OECD countries) has become a major source of revenue for governments around the world. Some 165 countries operated a VAT at the time of the completion of the International VAT/GST Guidelines in 2016, more than twice as many as 25 years before. As VAT continued to spread across the world, international trade in goods and services has also expanded rapidly in an increasingly globalised economy. One consequence of these developments has been the greater interaction between VAT systems, along with growing risks of double taxation and unintended non-taxation in the absence of international VAT co-ordination. The International VAT/GST Guidelines now present a set of internationally agreed standards and recommended approaches to address the issues that arise from the uncoordinated application of national VAT systems in the context of international trade. They focus in particular on trade in services and intangibles, which poses increasingly important challenges for the design and operation of VAT systems worldwide. They notably include the recommended principles and mechanisms to address the challenges for the collection of VAT on cross-border sales of digital products that had been identified in the context of the OECD/G20 Project on Base and Erosion and Profit Shifting (the BEPS Project). These Guidelines were adopted as a Recommendation by the Council of the OECD in September 2016.

China's VAT while seemingly conventional has two major impurities. One is that a separate export rebate system exists where rebate rates are linked from rates paid on creditable inputs. The other is the use of an income base for which there is no crediting of taxes on capital good, rather than the more conventional consumption base with expensing of investment expenditures. Here we argue that in a conventional competitive model both impurities would typically involve a welfare loss, but if we use a numerical calibrated equilibrium model with a monetary structure capturing by these Chinese features in which the trade surplus is endogenously determined and the exchange rate is exogenously set, things are different. These impurities effectively act as added taxes on domestic production (lowed export rebate rates, taxes on a larger VAT base) and tax exporting. Tax exporting reduces exports which lowers the surplus and accumulation of foreign currency. In a static model, a reduced surplus is welfare improving. Using 2002 data, we thus find that China's impure VAT system yields welfare gains in contrast to what a conventional model would show. These results are important since there are arguments being made inside and outside China for changes to be made and move closer to a pure VAT. Our results suggest that unless there are wider changes first in macro-structure, such changes may not be welfare preferred.

This Technical Assistance report presents an international perspective on the employment impact of tax policy, and develops recommendations considering the background in the People’s Republic of China. This report discusses the impact of tax policy including social security contributions on employment in China that covers both the taxation of employed labor and small- and medium-sized enterprises. The findings draw on economic theory, international experiences, as well as discussions with Chinese authorities during a workshop in Yangzhou and meetings in Beijing. The personal income tax on wages is low, but the tax wedge, which includes social security contributions, is high and follows an unsteady pattern, rising, falling, and again rising. The taxation of labor differs strongly by type and location of employment. The schedular system of the personal income tax means that labor taxes differ depending on the category into which income falls. Small businesses are offered some simplifications but are likely to still face disproportionally greater compliance costs.

This Technical Assistance report presents an international perspective on the employment impact of tax policy, and develops recommendations considering the background in the People’s Republic of China. This report discusses the impact of tax policy including social security contributions on employment in China that covers both the taxation of employed labor and small- and medium-sized enterprises. The findings draw on economic theory, international experiences, as well as discussions with Chinese authorities during a workshop in Yangzhou and meetings in Beijing. The personal income tax on wages is low, but the tax wedge, which includes social security contributions, is high and follows an unsteady pattern, rising, falling, and again rising. The taxation of labor differs strongly by type and location of employment. The schedular system of the personal income tax means that labor taxes differ depending on the category into which income falls. Small businesses are offered some simplifications but are likely to still face disproportionally greater compliance costs.

Selected papers presented at the International Symposium on Reform of the Chinese Tax System, held at the University of Western Ontario, in London, Canada, in Aug. 1996.

With the growth of the digitalized economy, VAT on cross-border digital supplies has emerged as an important issue. Yet, views and practices regarding the application of the VAT on these supplies differ significantly across different jurisdictions. A lack of international VAT harmonization can cause double taxation or unintended double non-taxation, resulting in distortions and revenue losses. VAT in the Digital Era considers unilateral and multilateral options for the creation of an internationally coordinated VAT framework. Providing analysis of the status quo in key jurisdictions, the book explores the implications of the digitalized economy for the VAT systems across borders. It outlines possible approaches that can be taken to achieve a more consistent international VAT treatment of cross-border supplies, and the extent to which a multilateral solution would be preferable and achievable at the international level. Bringing together contributions from leading international voices in the VAT law and policy and international taxation fields, VAT in the Digital Era addresses current issues and proposes ways to coordinate VAT rules on cross-border digital supplies. This new book is essential reading for academics, researchers, governments, and other financial organisations involved with the world's most important indirect tax.