The transition from business tax to value-added tax (VAT) is a significant fiscal reform in China. Its main goal is to reduce double taxation and simplify the tax system, making it more efficient for businesses. One of the key components of this reform is that VAT is only levied on the added value at each stage of production or distribution. This means companies can deduct the tax paid on purchases from their taxable amount. For example, if a manufacturer buys raw materials taxed at 10% and sells the finished product with a VAT of 13%, they only pay the difference.

Another important aspect is the broadened scope of industries covered. Initially, service sectors like finance, telecommunications, and modern services were included. Gradually, other sectors such as construction and real estate also adopted VAT. This expansion ensures a more equitable tax burden across different industries. Additionally, thresholds for small taxpayers have been set to ease the impact on micro-enterprises, helping them grow without excessive tax pressure. Overall, the VAT reform aims to boost economic efficiency while promoting fair competition. 💼📈