Tax reform will boost economy: minister

Finance Minister Lou Jiwei said Wednesday that the country's value-added tax (VAT), consumption, resources and property tax systems will continue to be reformed in order to boost the economy.

China will expand its pilot system of replacing turnover tax with VAT to include sectors such as transportation, telecommunications, and research and technological services, Lou said at the bimonthly session of the National People's Congress (NPC) Standing Committee, which will end on Friday, the Xinhua News Agency reported Wednesday.

While turnover tax is levied based on companies' gross revenues, VAT is levied on the difference between a good's production cost and its sales price before tax.

As of the end of June, some 1.34 million companies had taken part in the VAT pilot program, and the size of the tax reduction reached over 50 billion yuan ($8 billion) in the first half of 2013, People's Daily reported Wednesday.

Also, about 95 percent of firms and almost all small taxpayers benefited from the fall in tax, the newspaper said.

Wang Surong, a taxation expert with the Beijing-based University of International Business and Economics, told the Global Times Wednesday that small-scale service companies, for example, will definitely welcome VAT, because they have been paying a 5 percent consumption tax but now may only have to pay VAT of 3 percent.

Chen Shaoke, a taxation policy expert at Beijing Normal University, told the Global Times Wednesday that expanding the pilot program helps ensure the fair development of different industries, as well as completing China's tax system.

Starting from August 1, VAT reforms have been expanded from the current 12 provinces and municipalities to further reduce the tax burden for companies, especially small and micro-sized ones, Xinhua reported Wednesday.

Lou said China will also impose consumption tax for high-end products and goods that could severely pollute the environment or cause heavy consumption of resources.

The country will also adjust the process of collecting consumption tax and the tax rate, Lou said, without offering details.

"Because low-income households rarely consume luxury goods while high-income families are more likely to buy them, levying consumption tax on high-end products can help reduce the wealth gap between the rich and poor," Chen said.

The country also plans to extend its resource tax to coal, in addition to crude oil and natural gas, and base the tax on prices instead of sales volume, Xinhua reported.

And the government plans to widen its property tax trial scheme, which has so far been adopted in Shanghai and Chongqing.