Right move in VAT direction

China has introduced new value added tax (VAT) reforms across 10 cities and provinces, including Beijing and Guangdong province. The reforms, to be phased over the next six months, come on the heels of a successful VAT pilot program started in Shanghai in January.

The business community has welcomed the reforms, especially because of the current global economic uncertainty. The reforms will align China's indirect tax system with the world's best practices, reflecting the government's commitment to promote the growth of the services sector as part of the 12th Five Year plan (2011-15).

For many years China has had a dual system of indirect taxes - a VAT applicable to goods and a business tax applicable to the services industry.