Under the current economic situation, what major significance does the VAT transformation reform have in sustaining the steady and relatively fast development of our country’s economy?
The VAT transformation reform allows the input credit for the purchase of capital equipment to be offset against the output VAT. That will eliminate the double taxation resulting from the adoption of the production-type VAT system, reduce the
tax burden for investment in capital equipment, and a major tax cutting policy without introducing a change in the urrent tax rates. Since it can avoid double tax in the purchase of capital equipment, it will encourage investment, increase the demand in the domestic market, promote technological advancement, adjust the industry structure and the transformation pattern of the economic growth. Currently, the financial tsunami triggered by the sub-prime mortgage crisis has spread to Europe,Asia, and Latin America. Global economic growth rate has obviously been slowed down. Some countries have shown signs of economic recession. The financial crises have adverse impact on the real economy.
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