Starting from 1st May this year, the replacement of business tax with value added tax (VAT) will be extended to financial sector (with banking industry as the main body) and the applicable tax rate is 6%.

ANBOUND's research team is of the view that that although this measure has bright spot, overall, this is only a transitional measure.

This is a huge, long-term project and the future directions including levying VAT on net interest, allowing full deduction of input tax and integrating the value added chain between the upstream and downstream enterprises.

So long as the reform direction and the specific measures are right, this will eventually reduce the social cost of financing, unleash enterprises’ vitality, promote economic growth and propel the structural transformation of the economy.