Value added tax (valor agregado)

THE VALUE ADDED TAX (china)

Abstract

The paper examines the importance of the taxation system, Introducing the Value Added tax that increase the nation ‘s revenue, the government takes into consideration the importance and liabilities of how to implement it looking forward for better results with new reforms.
The importance of the Value Added Tax is notorious, making it one of the mostused and implemented tax all over the world, stipulating the economy in different ways in which the producer and the consumer are involved. Although it is necessary to implemented, every country has its own rates depending on the market and the necessities of government budget.
The purpose of this paper is to analyze the points of attention about the tax, the similarity and comparison with otherkinds. The People’s Republic of China tax system plays a very important role in the nation, increasing the profit and welfare.

Key Words: tax, reform, production, consumption

CONTENTS

1. Introduction…………………………………………………………………………...6
1. Roots[i] …………………………………………………………………………..6
2. Definition of Value Added Tax……………………………………....7

1. A comparison with salestax………………………………………………….8
…………………………………………………..9

2. China’s VAT system………………………………………………………………10
3.1. VAT rates………………………………………………………………………10
3.2. Taxable items rate………………………………………………………….11

4. VAT transformation reform in China………………………………………11
4.1. Major trends of the VAT transformation………………………….12

5.Conclusions …………………………………………………………………………13

References………………………………………………………………………………..14

1. Introduction

What we know today as VAT, in the ancient civilizations, like the Egyptian and Athenian was a sales tax. After the First World War, The Value Added Tax appeared in the legislation of many countries and became generalized.
The VAT was invented by a French economist named MauriceLauré in 1954., joint director of the French tax authority, the Direction générale des impôts, as taxe sur la valeur ajoutée (TVA in French) was first to introduce VAT with effect from April 10, 1954, for large businesses, and extended over time to all business sectors. In France, it is the most important source of state finance, accounting for approximately 45 percent of state revenues. WestGermany adopted VAT in 1968, and subsequently most other Western European countries also implemented some form of VAT. Many countries in Africa, Asia, and South America have also followed suit.
China started to implement VAT in 1984 on 24 specified taxable items. In 1994, corresponding with reform goal of building up socialist market economy system and pursuant to the guideline of "unification oftaxation management, equity of tax burden, simplification of tax system, rasonalization of revenue distribution relations and guarantee of the financial revenue", the former taxation system undertook an overall and structure reform. On December 13, 1993, the State Council of China promulgated "The Provisional Regulation of the People's Republic of China on Value Added Tax"，which put into effect onJanuary 1, 1994 and is currently effective in China.

VAT is administered by the State Administration of Taxation (the import VAT is collected by the customs on behalf), and the revenue from it is shared between the central government (75%) and local governments (25%). VAT is the major source of fiscal revenue for the Government of China, particularly the central government. In 2002, the revenuefrom VAT is 814.1 billion yuan, accounting for 47.61% of the state total tax revenue of the year, which is the first biggest tax in China.

Introducing the general definition of the term, VAT means value added tax, in general words is a national consumption tax that must be paid by people in each of the stages of the economy process in proportion to the value added product, as well...