According to a research made by Ching-Yang Yen, who was a deputy director in the first bureau office of the president of the Republic of China, the old sales tax system of China was consisted of Gross Business Receipts Tax (GBRT), stamp tax, and commodity tax. GBRT was a cascading sales tax; commodity tax was levied only on high class or luxury goods, which increased the management costs of some industries; stamp tax worked as a surtax of GBRT, leading a cascading taxation for businesses. Therefore, Chinese businesses were struggling with the heavily cascading sales tax system (Yen, 1993). To relieve this issue, China started to take a step-by-step reform to build a comprehensive VAT system to cut down or refrain from double taxation. And because of the economic condition in that period that was not allowed China to implement consumption VAT, China applied production VAT. In 1979, China began on the research of the feasibility of levying VAT in several cities; then in 1980 experimentally levied VAT in the industry of machine mechanical and agricultural machines due to their serious tax contradictions; in 1981, pilot range expanded to bike, and fan and sewing machine products; in 1983, tax locations expanded to national range, and in1984, State released The interim regulations on value-added tax of the People 's Republic of China (draft). In this level, Chinese VAT hadn’t established a uniform tax bracket on each area of industry, and hadn’t cover all products and all the processes, just introduced the VAT taxation met...
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...1%, into transportation industry and modern services industry (Liu, 2009).
In May 1, 2016, the pilot project that transferring business tax to VAT was implemented in full swing. This reform expanded the scope to construction, real estate, financial services, and living services (Liu, 2009). The change from business tax to value-added tax means the goods or services that used to be subject to business tax transfer to be taxed by VAT, and it taxes only for the value added parts. This decision made by State Council and the party central committee is to reduce repetitive taxation and corporate tax, promote the development of service industry, especially technology and other high-end services, and promote upgrading of industry and consumption. By the end of 2015, “the change from business tax to value-added tax” led up to 641.2 billion yuan of tax cuts in total (Zeng).
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