Wei Zhen1 Peng Yanfang2
(1.Wuhan Hongxu Information Technology Co., Ltd.; 2.Wuhan Hongxin Communication Technology Co., Ltd, 43000 Wuhan, Hubei)
Abstract:Since January 1, 2009, China has fully implemented the consumption-based value-added tax (VAT), which means that after 24 years the This means that the production-based VAT, which has lasted for 24 years, will soon be out of the stage of history, and the center of gravity of taxation will be the consumption-based VAT, which is more perfect and will surely play a greater role in contributing to the economy. This is of great practical significance for expanding domestic demand, reducing the tax burden of enterprise equipment investment, and promoting the technological progress of enterprises, industrial restructuring and transformation of economic growth mode. At the same time, the reform of VAT transition will inevitably lead to changes in accounting for fixed assets in related industries, thus affecting the financial position and operating results of enterprises, and this paper intends to analyze these issues.
Keywords:Value-added tax (VAT) transformation;Impact
I. Concept of Value-added Tax
The so-called value-added tax (VAT), that is, the difference between the output tax charged to consumers or users when the producer sells the goods and the input tax paid for the purchase of goods.China began to implement the value-added tax (VAT) when the tax reform was carried out in 1993, and the original "in-price tax" was replaced by "in-price tax". In 1993, when China started to implement VAT, the original "in-price tax" was changed to "out-of-price tax", and the method of tax deduction for purchase was unified. It was implemented to offset the input tax with the tax stated on the VAT invoice, and divided the taxpayers into general taxpayers and small-scale taxpayers, and the tax rate was divided into two grades.On November 5, 2008, the State Council held a party meeting and decided to implement the VAT transformation reform in the whole country. The meeting decided that since January 1, 2009, the VAT transformation reform would be fully implemented in all regions and industries nationwide, expanding the scope of input tax credits.
The VAT is categorized into production-type VAT, income-type VAT and consumption-type VAT according to the different methods for enterprises to deduct the tax included in the acquisition of fixed assets.
1. Production-based VAT
refers to the fact that no deduction of input tax included in the value of capital assets is allowed in the collection of VAT. As far as the whole society is concerned, the basis of VAT includes both means of consumption and means of production, which is equal to the gross value of the fixed assets produced and the gross value of all kinds of consumption products, i.e., the scope of levy is in line with the gross national product, and therefore it is called production-based VAT. The statutory value-added amount of production-type VAT is greater than the theoretical value-added amount, and it carries the obvious factor of double taxation for the industries or enterprises whose fixed assets account for a larger proportion of all assets, i.e., industries or enterprises with higher organic composition of capital.
2. Income-based VAT
This refers to the fact that in the collection of VAT, the input tax contained in capital assets is only allowed to be deducted from the input tax contained in its depreciated portion in the current period, i.e., the balance of the sales revenue minus the value of intermediate products invested in such as raw materials, auxiliary materials, fuels, power and depreciation, etc. is the value-added amount for the purpose of taxation. The basis of taxation is equal to the sum of wages, rents, interest and profits. For the society as a whole, the tax basis is equal to the national income, so it is called income-based VAT. Theoretically, income-based VAT is consistent with the theoretical meaning of VAT, but because the depletion and transfer of capital assets are carried out in installments, no tax deduction vouchers can be obtained in the process of transferring its value, and it is not convenient to adopt the invoice deduction method that is practiced nowadays.
3. Consumption-type VAT
means that when levying VAT, the price of all capital assets purchased during the taxable period is allowed to be deducted in one lump sum. That is to say, the balance of the sales revenue less the value of intermediate products put into production and the value of fixed assets purchased during the same period is taken as the value added for tax purposes. As far as the whole society is concerned, the basis of taxation is equal to the value of all consumer goods, so it is called consumption-based VAT. The legal value-added of consumption VAT is less than the theoretical value-added in the period when the fixed assets are purchased.
The main contents of VAT transformation reform
1. The implementation time and main application areas of VAT transformation
(1) The pilot VAT transformation in the Northeast region started on July 1, 2004, and the pilot VAT transformation in the Northeast region mainly includes the Heilongjiang province. The Northeast region of the pilot program mainly includes all counties and cities in Heilongjiang Province, Jilin Province, Liaoning Province and Dalian City.
(2) The pilot VAT transformation in the central region started on July 1, 2007. The 26 counties and cities in the central region of the pilot program include Taiyuan, Datong, Yangquan and Changzhi in Shanxi Province; Hefei, Maanshan, Bengbu, Wuhu and Huainan in Anhui Province; Nanchang, Pingxiang, Jingdezhen and Jiujiang in Jiangxi Province; Zhengzhou, Luoyang, Jiaozuo, Pingdingshan and Kaifeng in Henan Province; Wuhan, Huangshi, Xiangfan and Shiyan in Hubei Province; and Changsha, Zhuzhou, Xiangtan and Hengyang in Hunan Province.
(3) The pilot VAT transformation started on July 1, 2008 in the eastern part of Inner Mongolia. The pilot eastern region of Inner Mongolia mainly includes Hulunbeier City, Xing'an League, Tongliao City, Chifeng City and Xilingol League.
(4) On July 1, 2008, the pilot VAT transformation in Wenchuan earthquake-affected areas began. The Wenchuan earthquake-affected areas under the pilot program mainly include 51 counties (cities and districts) in the three provinces of Sichuan, Gansu and Shaanxi that have been identified as extremely hard-hit areas and hard-hit areas.
2. Main Contents of VAT Transformation
(1) Starting from January 1, 2009, on the premise of maintaining the current VAT rate unchanged, all general VAT payers nationwide and in all industries are allowed to increase the credit of input tax contained in their newly purchased equipments in the output tax of the current period, and the input tax not yet deducted in the current period can be carried forward to continue to be deducted in the next period.
(2) The input tax contained in the newly purchased equipment and the purchased raw materials are subject to the same taxable amount, and the standardized offsetting method is no longer adopted, and the tax rebate method practiced in the pilot areas is no longer adopted.
(3) The full credit method is adopted, and the incremental credit method practiced in the pilot areas is no longer adopted.
(4) In order to balance the tax burdens of small-scale taxpayers and general taxpayers, while expanding the scope of input tax credit for general taxpayers and lowering the VAT burden of general taxpayers, the tax burden of small-scale taxpayers has been adjusted downward, and the VAT levy rate has been adjusted downward from 6% and 4% to 3%, respectively.
(5) In conjunction with the full implementation of the VAT transformation reform, the VAT exemption policy for imported equipment and the VAT rebate policy for the procurement of domestically produced equipment by foreign-invested enterprises have been canceled; at the same time, the VAT rate for mineral products has been restored to 17 percent.
Third, the impact of VAT transformation on enterprises
1. The impact of VAT transformation on enterprises' accounting
(1) VAT transformation can more truly reflect the book value of fixed assets
After the implementation of consumption-based VAT, the state allows enterprises to deduct the input tax on purchased fixed assets from the output tax of the enterprise in the current period. In other words, the accounting treatment of purchased fixed assets is to debit the "Fixed Assets" account, debit the "Taxes and Fees Payable - VAT Payable (Input Tax)" account, and credit the "Bank Deposits, etc." account. "Bank deposits, etc.". Since the input tax can be deducted, the VAT paid by the enterprise to the state will be reduced, and since the taxable base of the enterprise's urban construction tax and education surcharge includes VAT, the urban construction tax and education surcharge paid by the enterprise will be reduced as well. On the one hand, the tax burden will be reduced, and on the other hand, the book value of fixed assets will be clearer.
In addition, after the transformation of VAT, the book value of fixed assets purchased by enterprises is their actual cost, which does not include VAT input tax and can truly and fairly reflect the book value of fixed assets.
(2) VAT transformation is more in line with the principle of matching
With the implementation of production-based VAT, the deduction chain of fixed assets is interrupted because they are not deductible for VAT input tax, and the corresponding deductible input tax for the current period is reduced. At the same time, the depreciation of fixed assets increases, the costs and expenses included in product costs increase, and under the condition of established product revenues, the principle of proportionality is not met. After the transformation of value-added tax, the fixed assets and the inventory of the enterprise are accounted for the same value-added tax, and the "tax payable - payable value-added tax (input tax)" account is set up uniformly at the time of purchase, which is allowed to be deducted from the current output tax, which better reflects the fairness of tax and the principle of comparability of accounting. The principle of comparability of accounting.
(3) VAT Transformation Reduces Asset Value and Enhances Market Competitiveness
The implementation of different types of VAT has different impacts on the balance sheet. In production type VAT, the value of assets increases because the VAT on purchases is not deductible and can only be credited to the original value of fixed assets. The VAT is also not deductible, thus leading to a significant increase in the amount of VAT payable by the company. With the implementation of consumption-based VAT, the input tax on new fixed assets in the year of investment in fixed assets is fully deductible at one time, and the amount of VAT is obviously reduced. At the same time, the booked value of fixed assets no longer includes the input VAT on purchases and is relatively significantly reduced, which leads to a reduction in depreciation of enterprises and promotes the improvement of enterprise profitability. Therefore, VAT transformation is not only conducive to enhancing the competitiveness of enterprises in the market, but also can help enterprises maintain a sound financial structure.
2. Impact of VAT transformation on enterprise investment
Enterprise investment in equipment and supporting investment will increase significantly, because of the impact of input tax credit on enterprise cash flow, which makes the enterprise's investment inclined to the equipment investment that can bring input tax credit. In addition, the transition reduces the return requirement of equipment investment, and the equipment investment plan of enterprises will have a greater possibility to pass the feasibility analysis. Enterprise investment behavior will actively follow the national policy. The enterprise's expectation of the policy effect of the transition will make the enterprise's investment behavior consistent with the policy direction as much as possible. On the one hand, for the consideration of tax neutrality, the enterprise will consider the transition as a good news, and the enterprise will take the initiative to cooperate with the implementation of the transition, so as to obtain the improvement of the competitive position brought about by the fairness of the tax burden. on the other hand, the enterprise will have an impact on the implementation path of the transition, and the enterprise will have a strong incentive to take action in order to obtain and keep the excess benefit brought about by the transition. On the other hand, enterprises will have an impact on the implementation path of the transition in order to obtain and maintain the excess benefits of the transition, they have strong incentives to take action, and may adversely affect the implementation of the transition.
3. Impact of VAT Transformation on Enterprises' Market Behavior
On the one hand, due to the reduction of tax burden, it is equivalent to the reduction of the cost of enterprise's unit products. The profit margin of enterprises will increase, and enterprises will have more room for operation in market competition, for example, they can reduce the price level of products to expand the market share, which is conducive to the participation of China's commodities in the international market competition. On the other hand, the transition to stimulate investment in enterprises, you can take this opportunity to develop new product categories to open up new markets, in which case enterprises will use newer and higher-quality products to capture the market, rather than necessarily reduce product prices. For the pilot, due to the geographical nature of the pilot there is an equilibrium price readjustment process, if it is in a perfectly competitive market, assuming that the production costs of enterprises inside and outside the region are the same, then the regional enterprises can reduce the price of their products until they will be squeezed out of the market by enterprises outside the region. This price adjustment will be a long-term process, but in an imperfectly competitive market, especially if there is regional market segmentation, it is possible that the products of firms inside and outside the region can be sold at different prices, so that there are multiple regional equilibrium prices in the market. Such localized VAT transformation pilots may also lead to a downward adjustment of the overall price level of the products concerned, but this process is closely related to the implementation of the pilot policy. The more stable the pilot policy is and the longer it lasts, the better the action effect of the pilot enterprises will be, which faces the risk of the state promulgating new policies and the counter pressure from the enterprises in other regions, the formation of the transition path is the result of the equilibrium of several forces, and the pilot enterprises must consider this problem.
References:
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[2]Sun Haoxuan Sun Le:What is the significance of VAT transformation reform. China Securities Journal.2009.02
[3]Gao Peiyong:2008:A new round of tax reform into the substantive operation stage. Financial Supervision.2008(5).