VAT to ease firms' burden, boost growth

China will replace business tax with value-added tax, or VAT, from May 1 in what is seen as a major taxation reform. The move will reduce the government's tax revenue by more than 500 billion yuan ($76.99 billion), but simultaneously it will ease the tax burden of enterprises. In this sense, the tax reform shows the government is serious about helping enterprises tide over the tough economic situation and further stabilize the macroeconomy.

The replacement of business tax with VAT will eliminate multiple taxes on the same products and help the market play a more decisive role in resource distribution. The pilot program of replacing business tax with VAT will be extended to the remaining four sectors - property, construction, finance and consumer services - to cover all goods and services. VAT will be levied with different tax rates to ensure the implementation of the tax reform and ease the tax burden on various industries.

Also, real estate input tax deduction is an important part of the overall pilot reform.