2016年CRI Chinese Premier Urges Breakthrough in VAT Reform（在线收听）

Premier Li said the full replacement of business tax with VAT is an important tool to promote structural change, in particular supply-side structural reform.

"It would significantly ease the burden of businesses. In a way, it will contribute to improving the overall economic structure. The reform measures will lead to multiplied effects. It will serve to encourage more R&D expenditure by companies; boost demand through extended production chains; and make the environment more conducive for modern services and small and micro businesses."

Premier Li pointed out that although positive changes can be seen in the economy, the foundations for economic performance are not yet stable.

He urged local governments to focus on economic transformation and upgrading, mobilize the initiative of companies, and to expand effective investment in equipment upgrading and technology transformation.

Starting from May 1st, the replacement of business tax with VAT will be extended to construction, real estate, finance and consumer services.

The pilot sectors will involve 10 million more taxpayers, whose yearly business tax amounts to nearly 2 trillion yuan in total, making up 80 percent of the gross business tax revenue.

Vice Minister of Finance, Shi Yaobin, says the VAT pilot program is the largest since 2013.

"It's been predicted that the VAT reform will ease taxes by 500 billion yuan or 77 billion US dollars in 2016. Meanwhile, it also helps to avoid double-taxation, reducing the tax burdens on all industries. The reform is an important arrangement to bring the VAT's neutral function into play, so as to promote the fair development of all sectors."

In addition, the reform embraces many economic transactions carried out by enterprises and individuals.

Among them, the tax burden on second-hand house sales, which has been a big concern for home buyers.

Wang Kang is deputy director of the State Administration of Taxation.

"VAT reform will help to reduce the tax burden when people buy a second-hand home. In the past, the business tax rate was 5 percent. If people spent one million yuan, they would have to pay 50-thousand yuan in tax. Starting from May, housing buyers will pay 24-hundred yuan less than before."

A business tax-to-VAT pilot began four years ago, and has been gradually expanded.

By the end of 2015, it had reduced the tax burden of enterprises, most of which are small companies, by 640 billion yuan.

For CRI, this is Min Rui.