Taxation Reforms and Changes in Revenue Assignments in China

By Raju J Singh, Ben Lockwood, Ehtisham Ahmad

July 1, 2004

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Raju J Singh, Ben Lockwood, and Ehtisham Ahmad. Taxation Reforms and Changes in Revenue Assignments in China, (USA: International Monetary Fund, 2004) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The value-added tax (VAT) in China has the unusual feature that capital goods are included in the VAT base. In addition, most services are subject to the business tax, which is not creditable against VAT, but which accrues to local governments, and operates as a turnover tax. On grounds of economic efficiency, it would be desirable to eliminate these distortions so that domestic producers are not increasingly placed at a disadvantage as China dismantles tariff and nontariff barriers on competing goods. Reforming indirect taxation would however generate considerable revenue losses for local governments and, in the absence of any compensatory mechanisms, there would be significant impediments to the needed reforms. This paper focuses on the extent of revenue losses, their distribution across provinces, and possible options for compensation.

Subject: Consumption taxes, Corporate income tax, Revenue administration, Revenue performance assessment, Tax efficiency, Taxes, Value-added tax

Keywords: Base scenario, Business tax, China, Consumption taxes, Corporate income tax, Fiscal Policy, Indirect Taxation, Intergovernmental Fiscal Relations, Revenue-returned formula, Tax efficiency, Tax revenue, Value-added tax, VAT base, VAT revenue, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2004/125
Stock No:

WPIEA1252004
ISBN:

9781451854855
ISSN:

1018-5941

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