Starting August 1st, a new phase of national tax reform and targeted tax reduction policies for small and medium-sized enterprises (SMEs) will be officially launched. According to the latest data from the State Administration of Taxation, pilot taxpayers have been confirmed across various regions, with over half of modern service enterprises included in the program. This marks a significant expansion of the "business tax to value-added tax" (VAT) reform, which was initially piloted in select areas.
As part of the nationwide rollout, the reform will extend beyond regional pilots, covering more industries and businesses. As of now, there are approximately 1.042 million pilot taxpayers, including 477,100 in the transportation sector and 565,500 in modern services. The reform is expected to reduce the overall tax burden on SMEs by about 40%, with an estimated total tax cut of 120 billion yuan for enterprises in 2013.
To ensure a smooth transition, local tax authorities have completed extensive preparations, such as updating taxpayer billing software, managing invoice sales, and upgrading anti-counterfeiting systems. These measures are critical to guaranteeing that invoices can be issued without disruption starting August 1st.
The State Administration of Taxation has also held video conferences to coordinate efforts and deployed 11 inspection teams to 22 new pilot regions to monitor implementation closely. A senior tax official admitted that the night before the reform's launch would likely be a sleepless one for many staff members.
Local governments have already conducted simulations to assess the impact of the reform on their respective economies. For example, Gansu Province expects a reduction in local tax revenue of over 600 million yuan, while Hunan and Guangxi anticipate reductions exceeding 1 billion yuan. In most regions, over 90% of businesses are expected to benefit from the tax cuts, with some development zones seeing tax reductions of more than 60% for SMEs.
For companies that may face increased tax burdens under the new system, local governments have made detailed calculations. In Hebei’s Xinhua District, for instance, only a small percentage of enterprises—less than 7%—are expected to see a rise in taxes. In other areas, the proportion is even lower, around 5%. To support these businesses, local governments have set aside funds based on previous experiences in Shanghai and Beijing.
Experts estimate that the VAT reform will boost Shanghai’s GDP growth by 0.6 percentage points in 2012 and increase the contribution of the tertiary sector to the city’s GDP by 2 percentage points. According to Director Wang Jun of the State Administration of Taxation, the reform will significantly ease the tax burden on manufacturing, encouraging innovation and industrial upgrades.
In addition, the tax authority has emphasized the need to maintain stability in existing pilot sectors while preparing other industries, such as railway transport and telecommunications, for inclusion in future phases. Finance Minister Lou Jiwei has also announced plans to expand VAT to all service industries within one or two years, including real estate. It is projected that this broader reform could result in a total tax reduction of 900 billion yuan.
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