China to Expand Value-Added Tax Reform, Support Central Region

China’s Premier Wen Jiabao hosted an executive conference with China’s State Council standing committee on July 25, where it was decided that the scope of China’s value-added tax (VAT) pilot project will be expanded, the development of China’s central region will be further promoted, and the minimum living standard guarantee will be strengthened and improved.

According to the government statement, from August 1 to the end of this year, the scope of the VAT pilot project – which aims to replace business tax with VAT for the transport sector and some modern service sectors – will be expanded from Shanghai to Beijing, Tianjin, Xiamen and Shenzhen, as well as the provinces of Jiangsu, Zhejiang, Anhui, Fujian, Hubei and Guangdong. More areas will also be added next year, and the pilot project will be extended to some other sectors throughout the country.

The State Council also approved a plan to promote the development of China’s central region. The central region, which consists of Shanxi, Anhui, Jiangxi, Henan, Hubei and Hunan provinces, is of great importance to China’s regional development.

Therefore, the implementation of the strategies for the rise of central China should be vigorously promoted; more attention shall be drawn to the transformation-oriented development and coordination, as well as the sustainable development. Moreover, efforts should be made to stimulate the domestic demand of the central region and to further expand its development space.

As forwarded by the official statement, in order to realize the rise of the central region, there are seven tasks need to be fulfilled. They are:

• Strengthening the construction of a national strategic grain base, energy and raw materials base, and a modern equipment manufacturing and high-tech industrial base
• Coordinating the development of various transportation modes, improving the comprehensive capacity of transportation in all aspects, and strengthening the status as an integrated transportation hub
• Supporting the development of key areas
• Offering support to accelerate the development of underdeveloped areas
• Safeguarding and improving people’s well-being
• Strengthening resource conservation and environmental protection
• Promoting reform and innovation, comprehensively enlarging opening-up areas

In addition, the central government calls for increasing the policy support to the central region and offers four polices to support central region development, which are:

• Intensifying financial transfer payment support
• Supporting main grain producing areas to improve financial capabilities
• Supporting the central region to improve people’s welfare and promoting the equalization of basic public services
• Supporting the construction of key eco-functional zones, such as the Three Gorges Reservoir area, Danjiangkou Reservoir area and Shengnongjia Forest District

Strengthening and improving the minimum living standard guarantee is another focus of the conference. The State Council has put forward four measures to facilitate the goal, which are:

• Improving the criteria for qualifying within the low-income group
• Standardizing the examination and approval procedure
• Establishing a verification mechanism, enhancing dynamic management
• Improving the supervision mechanism

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