Reforming China's tax system

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chinaLate last week a Chinese official laid out the primary tasks for reforming the taxation system, and after speaking with China’s Minister of Finance Lou Jiwei, Xinhua explained that the emphasis is on taxation as a source of revenue and a tool of structural optimization and industrial upgrades. The Minister of Finance was quoted as saying ‘We will establish a tax system that lends itself to scientific development, social equity and market unity,’ this came after the Communist Party of China released key policies on improvement to the taxation system. He added a consumption-based VAT system, in line with industrial development rules, will soon eliminate double taxation, The first giant hurdle to overcome is replacing turnover tax with value-added tax (VAT) the charge based on the market price of the product minus the cost of manufacture. The new VAT system has been implemented to the country’s transportation industry and six service sectors, after regional tests in 2012, it has already saved business 94 billion yuan ($15.3 billion) in its first 10 months. Changes in the consumption tax will be used modify consumption of products which producess high pollution or use large amounts of energy. The course of action also calls for legislation on housing property tax, meaning an increase in taxes on ownership, but a decrease in taxes for construction and sales. The trials of which have been running since the beginning of 2011.