China to expand VAT reform

China will expand a pilot reform to replace turnover tax with value-added tax (VAT) in an effort to reduce companies' tax burdens and curb double taxation, an official statement said Thursday.

The Ministry of Finance (MOF) said in a statement on its website that it is currently working with other government departments on plans to expand the VAT reform to more sectors, including the telecommunications, construction, real estate, finance and living service sectors.

Living services refer to services that meet people's daily life needs, such as catering, accommodation, hairdressing and photography services.

"The country will steadily expand the scope of the pilot reform and strive to complete the reform by the end of the 12th Five-Year Plan (2011-2015)," the statement said.

VAT is tax levied on the difference between the cost of production and the price of a commodity on the market. It is favored partly because it can reduce double taxation.

Following regional experiments since the beginning of 2012, VAT reform in transportation and some modern service sectors was rolled out throughout the country on Aug. 1, 2013.

The country expanded the pilot reform to the railway transportation and postal service sectors starting on Jan. 1, 2014.

Around 2.7 million enterprises were covered by the VAT reform by the end of last year, up 160 percent from the end of 2012, the statement said.

By the end of 2013, the reform reduced tax burdens for companies by more than 140 billion yuan (22.83 billion U.S. dollars), up from 42.6 billion yuan in the previous year, according to the MOF.

"With the progress of the pilot program, the policies concerning the trials and management measures have gradually become mature," the statement said.

The reform has shown effects in terms of reducing double taxation, promoting the service sector's development and unleashing the vitality of involved enterprises, the MOF said.