Economics
China's About to Start Its Biggest Tax Overhaul in Two Decades
- Local governments will feel the most pain from lost revenue
- Overhaul will lower corporate taxes by $77 billion this year
Chinese one-hundred yuan banknotes are arranged for a photograph.
Photographer: Tomohiro Ohsumi/BloombergThis article is for subscribers only.
China’s biggest tax overhaul in more than two decades starts May 1, with changes set to reduce the burden on services companies and encourage factories to upgrade and innovate.
Under the new system, taxes in the construction, property, finance and consumer service sectors will now be applied to the value added -- such as the difference between wholesale and final sales price for a retailer. That’s in contrast to the existing revenue-based levy. Manufacturers, which already operate under a value-added tax structure, will now get tax breaks on research and development to help them modernize.