China to Expand Scope of Value Added Tax Program

China to Expand Scope of Value Added Tax ProgramChina continues to expand its scope of the pilot program that will be replacing the turnover tax with value added tax by adding two new sectors under the tax reform. China will be incorporating the railway transportation and postal service sector in the ongoing value added tax reform starting January 2014

Value added tax is a tax that is levied on the difference between the cost of production and the price of a commodity in the market and us favored partly because it reduce double taxation. After regional experiments since the start of 2012, the value added tax reform is rolled out throughout the country which reduced the taxes on businesses by 94 billion yuan in the first ten months of 2013. Tax experiments in the past two years pushed development forward in the service sector and promoted economic restructuring while providing more jobs.

Presently the reform is focused on certain service sectors such as transportation using waterways, air and pipelines and several modern services as well like information technology, consulting services and cultural innovation.

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