China To Simplify VAT System

By Global Tax Weekly

China recently announced that it is lining up new measures to simplify a simplification, as it seeks a smoother roll-out of its new value-added tax system, which is replacing the complex business tax regime. But it remains to be seen whether the well-meaning intentions of state officials turn out to be a help or a hindrance to business.

It could also be said that China’s ongoing reforms have not been terribly effective. Otherwise it wouldn’t find itself in 137th place in the Paying Taxes index. Indeed, where China is concerned, company executives seem to think that the legal framework is becoming less predictable, if the results of PwC’s Doing Business in China survey are anything to go by. This found that businesses are more concerned about their ability to interpret regulations and anticipate costs, with only 12 percent of China/Hong Kong CEOs more confident today in forecasting compliance or tax liabilities compared with 16 percent who shared the same view last year.

However, despite a more difficult operating environment, exacerbated by rising costs and slowing economic growth, China remains the market everyone wants to crack. For US companies, it is worth USD400bn, according to the US China Business Council, so foreign investors aren’t going to turn their backs on the Middle Kingdom in a hurry.

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