Key points in the ＂14th Five-Year Plan＂ reform of value-added tax： completing legislation and merging tax rates into three grades and two grades.

　　As the largest tax in China, the reform of value-added tax is unprecedented. In recent years, the tax reduction of over 3 trillion yuan has not only reduced the burden on enterprises, but also further improved the tax system. At present, the central government is studying and formulating the 14th five-year plan for national economic and social development (hereinafter referred to as "‘ Fourteenth Five-Year Plan ’ Planning "). The value-added tax reform in the 14th Five-Year Plan period not only concerns the tax burden of thousands of enterprises, but also affects the modernization process of China’s tax system and even the country’s governance capacity, so it has attracted much attention.

　　A number of finance and taxation experts told the First Financial Reporter that the VAT that has started the legislative process will definitely be completed during the "14th Five-Year Plan" period, and the reform will also be promoted simultaneously. Among them, the three tax rates of value-added tax of 6%, 9% and 13% will degenerate in two directions, and reducing the burden is still the general trend, but it is difficult; The value-added tax rebate will be further expanded, and it will gradually involve huge taxes in stock; The input deduction of value-added tax is also expected to increase, and whether the bank loan interest can be deducted is a major point of view; Numerous preferential tax policies should be further cleaned up, giving full play to the "neutral" advantage of value-added tax and reducing the distortion to the economy.

　　The effect of reducing the burden by over 3 trillion yuan is obvious

　　Since the business tax was changed to value-added tax in 2012, value-added tax is the most frequent tax in tax reform.

　　In 2016, the business tax was changed to value-added tax, and the business tax bid farewell to the historical stage, eliminating double taxation and realizing the full coverage of value-added tax on goods and services. Then, the deepening reform of value-added tax was started, and the fourth tax rate was finally simplified and greatly reduced to 6%, 9% and 13%. The input deduction of value-added tax is increased, and real estate and passenger transportation are included; The incremental part of the enterprise value-added tax allowance is allowed to be partially refunded.

　　In addition, after the reform of the camp, the proportion of central and local VAT revenue will be changed from 75:25 to 50:50, which is also conducive to the smooth operation of local finance.

　　"VAT reform is the biggest action in China’s tax reform in recent years. Since the reform of the camp in 2012 (by 2019), the value-added tax reduction has reached 3.2 trillion yuan. The value-added tax reform reversed the upward trend of China’s macro tax burden, reduced the burden on enterprises, increased profits, and promoted the upgrading of industrial structure. " Tian Zhiwei, deputy dean of the Institute of Public Policy and Governance of Shanghai University of Finance and Economics, told the First Financial Reporter.

　　Shandong Lianhong New Materials Technology Co., Ltd. is an enterprise specializing in the production, research and development and sales of advanced polymer materials and special chemicals. Peng Jie, the company’s financial officer, said that thanks to the value-added tax reform in recent years, the company paid less value-added tax by about 3.46 million yuan in 2018, reduced taxes by 33.69 million yuan in 2019 and reduced taxes by about 30.48 million yuan from January to August 2020.

　　Li Xuhong, director of the Institute of Finance and Taxation Policy and Application of Beijing National Accounting Institute, told the First Financial Reporter that the VAT reform during the "Thirteenth Five-Year Plan" period has made important contributions to optimizing China’s tax structure, consolidating the modern tax system, reducing the tax burden of enterprises, stimulating the vitality of market players and optimizing the business environment.

　　Although the new measures of value-added tax reform in the "14 th Five-Year Plan" period have not been determined, experts generally believe that the value-added tax legislation can be completed. The current value-added tax still exists in the form of the State Council Provisional Regulations. In order to implement the statutory principle of taxation, the value-added tax has started the legislative process, and the draft of the value-added tax law was made public at the end of 2019.

　　Shi Zhengwen, a professor at China University of Political Science and Law, told the First Financial Reporter that in order to implement the principle of statutory taxation, the current National People’s Congress is expected to complete the VAT legislation before the transition in 2023, and it will be completed by the end of the 14th Five-Year Plan at the latest. However, VAT legislation does not mean the "freezing" of reform, and the two need to be promoted together. The purpose of both legislation and reform is to build a fair and standardized modern value-added tax system, that is, degenerate tax rate, smooth deduction, giving full play to the "neutral" advantage of value-added tax and reducing economic intervention.

　　Li Xuhong believes that the VAT legislation should be completed during the Tenth Five-Year Plan period. At the same time, under the background of economic digitalization, there will be more new forms and new formats, so the tax object and the rules to avoid double taxation of value-added tax need to be adjusted to adapt to the changes in the environment; At the same time, it is also necessary to consider how to reduce the management cost of value-added tax to promote the reduction of transaction costs with the improvement of national governance level and the advancement of modern technology of tax collection and management.

　　The tax rate is simple and difficult in the direction of reducing the burden

　　The State Council has made it clear that the degenerate direction of VAT rate is three grades and two grades. However, in the draft of VAT tax law released at the end of last year, the current three-grade tax rates of 6%, 9% and 13% are still maintained. Whether the value-added tax rate will continue to be lowered in the next five years, and whether the three tax rates will be merged into two, has attracted much attention from the market and is also the core issue in the next step of legislation.

　　In recent years, a major focus of VAT tax reduction measures is tax rate degeneracy and reduction. In 2017, the VAT rate was reduced from the fourth grade (6%, 11%, 13%, 17%) to the third grade (6%, 11%, 17%). In 2018, the 17% tax rate was reduced to 16%, and the 11% tax rate was reduced to 10%. In 2019, the current VAT rate was maintained.

　　In the process of tax rate degeneracy and reduction, the state has issued some temporary preferential policies in order to insist that the industry tax burden will only decrease rather than increase. For example, taxpayers in the life service industry are allowed to add 15% to the deductible input tax in the current period to offset the tax payable. The purpose of this move is to increase the input deduction to ensure that the tax burden does not increase.

　　Li Xuhong believes that according to the international development trend of value-added tax, it is necessary to reduce the difference in tax rates in order to play its neutral function. At present, countries that retain the two tax rates still account for the majority; At the same time, more and more countries that adopt modern value-added tax system no longer prefer to raise the standard tax rate, so as to avoid inhibiting economic behavior.

　　Shi Zhengwen said that a major goal of optimizing China’s tax structure is to reduce the proportion of indirect taxes, while value-added tax, as the largest indirect tax, should be moderately reduced, and tax reduction is still a major direction of value-added tax reform in the future. The way to reduce VAT tax is to reduce the tax rate or increase the deduction to reduce the tax base. At present, the basic VAT rate of 13% still has room for a drop of one or two percentage points in the future. However, at present, it is very complicated to degenerate the three tax rates into two. If the conditions are not met, it may not be introduced in the 14 th Five-Year Plan.

　　Tian Zhiwei believes that at present, there is a great pressure on fiscal revenue, and there is limited room for reducing the burden of value-added tax. If the economy improves and fiscal revenue increases during the 14 th Five-Year Plan period, it is possible to continue to achieve degeneracy by lowering the tax rate. Of course, if the economy is overheated, it is not excluded to realize tax rate degeneracy through structural tax increase.

　　Deduction and retention of tax refund attract attention

　　In the VAT tax reduction policy, it is equally important to reduce the tax base by increasing the input deduction.

　　For example, after the full implementation of the reform of the camp, China allowed real estate to be included in the scope of input deduction for the first time. Last year, the input tax paid by real estate was allowed to be deducted from two years to a one-time full deduction, which made the taxpayer’s deductible input tax increase in the current period and reduced the tax burden. Last year, domestic passenger transport services were also allowed to be tax deductible.

　　Shi Zhengwen believes that the reason why some enterprises have a heavy VAT tax burden is that the deduction is insufficient. The next step of VAT reform needs to improve the VAT deduction system, which is no less than the tax rate reduction. For example, it is possible to introduce bank loan interest into the input tax during the 14 th Five-Year Plan period, allowing deduction. At present, the financing cost of the real economy is relatively high. One of the main reasons is that loan interest is not allowed to be tax deductible, which is not in line with the basic principle of value-added tax. If the impact on fiscal revenue is not considered, this reform is expected to be launched.

　　Tian Zhiwei also believes that it is possible to allow loan interest to be tax deductible in the future. In addition, in order to build an international financial center, we can consider giving zero tax rate or tax exemption to the export value-added tax of financial services.

　　Li Xuhong said that from the perspective of the integrity of the value-added tax chain, in principle, a complete deduction should be realized between the upstream and downstream, but there may be some restrictions based on factors such as policy adjustment. However, from a general perspective, the negative list method should be adopted, excluding some items that cannot be deducted, and the rest items can be deducted. However, according to the survey, it is not entirely due to the influence of the tax system that the market entities cannot realize the complete deduction, and a considerable part of it comes from the market environment to be improved.

　　When the output tax of a VAT taxpayer in the current period is insufficient to make up for its input tax, the difference is called tax allowance. Before 2018, the value-added tax retained in China will not be refunded in the current period, and will be carried forward to the next period for deduction. This is equivalent to the fact that the prepayment of taxes by enterprises occupies the cash flow of enterprises and increases the burden on enterprises.

　　In order to reduce the burden on enterprises, in 2018, China began to refund part of the value-added tax to some advanced manufacturing industries. In 2019, the tax refund system for the end-of-value-added tax was piloted. Eligible enterprises can apply to the competent tax authorities for refund of the incremental tax allowance.

　　Li Xuhong said that the tax refund system for VAT has played a positive role in enhancing the neutrality of VAT, reducing the burden on taxpayers, optimizing the business environment and improving the tax system in China. At the same time, it is also a tax policy with a strong sense of general gain among enterprises in various policies of tax reduction and fee reduction in China. We also need to see that China’s VAT tax refund system has not fully realized the tax refund, and there are still some funds deposited. Some may be due to historical reasons, and the amount of tax refund for the stock has not been fully refunded, while some may be due to local financial resources, so it is still necessary to make further optimization.

　　Liang Ji, a researcher at the Chinese Academy of Fiscal Science, believes that the next step should be to continue to expand the pilot program, gradually refund taxpayers’ stocks of tax credits in batches, and at the same time deepen the reform of VAT income division.

　　"What needs to be broken through is the distribution of fiscal revenue. Where should the tax refund be borne by the business activities that occur across regions, and what proportion of tax refund should be borne by each region, all of which are the coordination of income distribution." Li Xuhong said.

　　Tian Zhiwei believes that the general trend of reform in the future is that the value-added tax will be fully refunded, including the stock tax. However, due to the large scale of this part of the tax, once the tax rebate is allowed, the impact on the current fiscal revenue will be too great. Therefore, in the future, the incremental tax rebate will be allowed first, and then gradually expanded to the stock tax rebate.

　　Author: Chen Yikan