News & Reports News Year 2012 October 2012 Tax reform helps companies in Shanghai save over US$2.7b

Tax reform helps companies in Shanghai save over US$2.7b

COMPANIES in Shanghai have saved over 17 billion yuan (US$2.7 billion) in taxes so far this year following a reform which unveiled a value-added tax for a fairer system.
The VAT also spurred Shanghai's service sector to grow over 10 percent, higher than the city's economic growth of around 7 percent.
"Stimulated by the tax reform, a batch of manufacturing companies separated their service arms for a lower tax, enhancing their specialty and raising the overall competitiveness," Shanghai officials said at a meeting on the expansion of VAT in Beijing, a government statement said yesterday.
The VAT reform, which has been implemented in six provinces, three municipalities and three cities, will gradually widen across the country, Vice Premier Li Keqiang said at a work meeting on expanding trials of replacing business tax with a value-added tax on Thursday.
Shanghai started the tax reform at the start of this year in a trial run, replacing the business tax with the VAT in certain service sectors to create a fairer tax system and accelerate industrial upgrading.
Different from the business tax which is levied on a company's gross revenue, the VAT charges at each stage of production and services when value is added to a product.
Shanghai imposes a 17 percent VAT on leasing tangible assets, 11 percent on transport, and 6 percent on selected services. For small businesses with annual revenue of 5 million yuan or less, the rate is 3 percent..