Xinjiang benefits from tax reform

URUMQI - Since adopting a pilot reform to replace business tax with value-added tax (VAT) two years ago, Xinjiang has witnessed a tax reduction of about 4 billion yuan ($635 million), regional taxation authorities said Monday.

Wu Jimin of the Xinjiang Uygur autonomous region's taxation bureau, said a total of 59,000 enterprises had been included in the program by the end of June, about three times of the number when the pilot was initiated in August 2013.

Shen Xiang, legal representative of Jinbao, a logistics company in the regional capital of Urumqi, said that before the reform, the company had to pay 300 yuan in business tax for every 10,000 yuan of income without any deductions. Now the business tax has been substituted by VAT at 11 percent, and the cost of vehicle repairs and material can be used as a deduction. The company has seen a tax cuts of 520,000 yuan last year, he said.

Wu said the tax reform has boosted market confidence and employment. Statistics from the office shows that fixed assets investment in transportation, warehousing and mail businesses grew 33.2 percent in 2014. Investment in information transfer, computers and software saw an yearly increase of 29 percent.

During last year, newly registered businesses in the service sector brought about 300,000 new jobs. Tertiary industries in the region recorded an added value of 380 billion yuan, up by 10.9 percent from 2013.

Business tax and VAT are two major tax categories in China. Business tax is a tax on the gross revenue of a business, while a VAT is levied on the difference between a commodity's price before taxes and its cost of production.

The VAT reform program, initially launched in Shanghai in January 2012, is considered a taxation reduction, especially for the service sector.

Nationwide, the program has led to a fall in fiscal revenue of 192 billion yuan in 2014, according to the State administration of taxation.