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China to expand VAT reform: official

Updated: 2012-03-26 09:47


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BEIJING - China will expand the scope of value-added tax reforms in a bid to accelerate structural adjustments in the economy, a senior official said Sunday.

While attending the first Lingnan Forum held in Sun Yat-sen University in the south China city of Guangzhou, Xiao Jie, director of the State Administration of Tax (SAT), said China will continue to extend the current pilot program in Shanghai to more areas and sectors.

To avoid double taxation, China started replacing its turnover tax with a value-added tax (VAT) in the transport sector and some service sectors in Shanghai from January 1 this year.

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

Xiao said although the pilot program just started, it has already brought about some changes, such as an easing of tax burdens on a majority of people.

Based on SAT calculations, the replacement of the turnover tax could lift GDP growth by 0.5 percentage points and export growth by 0.7 percentage points, while helping to create some 700,000 jobs, according to Xiao.

He said if the reform unfolds in full-swing, it will result in tax reductions of over 100 billion yuan ($15.9 billion).

Xiao also expressed hopes that the province of Guangdong will also carry out similar pilot programs.

The first Lingnan Forum, co-hosted by Lingnan College of Sun Yat-sen University and Caixin Media, opened on Sunday to discuss China's economic reforms.

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