Chinese businesses saved 210.7 billion yuan (31.5 billion U.S. dollars) as of the end of July under a reform plan to replace business tax with value-added tax (VAT), official data showed on Sunday.
Tax reform was expanded to construction, real estate, finance and consumer services in May, the last four industries to be covered by the exemptions, according to the State Administration of Taxation (SAT).
Up to 126 billion yuan in taxes was exempted during the May-July period, compared to 84.7 billion yuan in the first four months of the year, SAT data showed.
VAT refers to a tax levied on the difference between a commodity’s price before taxes and its production cost. Business tax refers to a levy on a business’s gross revenues. VAT is favored partly because it can reduce double taxation and lift the burden on Chinese firms, especially smaller ones.
China replaced all business tax with VAT starting May 1, 2016. VAT reform was gradually rolled out in more regions and sectors after regional experiments in selected industries since the beginning of 2012.
The reform is thought to be helpful in stimulating entrepreneurship and supporting private enterprises and small firms, which play a central role in job creation.
