China has just started a value-added tax (VAT) system across all industries that used to have a business tax. This is the most ambitious overhaul of their tax regime that they’ve had in three decades. They have created tough reforms in their transition to being a services-oriented economy, rather than one powered by manufacturing.
The government first started to think about VAT in 1979 and they started using the tax in 2012. The final four sectors that they have added the VAT to include construction, property, finance and life services.
Consumers will feel the VAT in different ways depending on what they are buying, according to China’s Vice Minister Shi Yaobin. The revenue from the VAT will be shared between China’s central and local governments and each will receive 50%.