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IMF Calls For Single VAT Rate In China

by Mary Swire, Tax-News.com, Hong Kong

17 August 2015


The International Monetary Fund has recommended that China introduce a single rate of value-added tax, during recent talks on the rapid progress China is making on fiscal reform.

The IMF said China is continuing to make progress on extending the value-added tax to a broader range of services, as part of its plans to replace the business tax with VAT. Authorities plan to finish the implementation of the VAT by the end of the year, by introducing VAT on the financial services industry.

Railway transportation services, postal services, and telecom services sectors were added to the VAT base in 2014. As a result of the transition from business tax to VAT, businesses have saved some CNY191.8bn (USD30bn).

The IMF said that minimizing the number of VAT rates – ideally to a single rate – would have significant administrative benefits. It said the policy objectives of having multiple rates could be more efficiently achieved with other fiscal instruments.

Discussing recent tax policy changes, the IMF welcomed recent increases to tax on petrol and ongoing natural resource tax reforms. It said that these measures will promote more environment-friendly growth. The IMF concluded that the national rollout of a property tax, by 2017, will provide an important source of local government revenue.

TAGS: environment | VAT rates | tax | economics | business | value added tax (VAT) | property tax | fiscal policy | International Monetary Fund (IMF) | China | tax reform | services

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