China Replaces Tax with VAT

In some sectors, China’s current business tax will be replaced with a value added tax (VAT), a consumption tax that is levied wherever value is added from any stage of production. The VAT tax will be introduced on 1 May in construction, real estate and financial and consumer services sectors. According to Vice Finance Minister Shi Yaobin, the government hopes to cut taxes by more than US$77.32 billion in 2016, which will stabilize economic growth. The VAT reform was launched in 2012 as a trial and has already reduced tax burdens by US$92.8 billion.