Features of the legal regulation of value added taxation in the field of small business of the People's Republic of China

The original article: https://legascom.ru/notes/7672-features-of-the-legal-regulation-of-value-added-taxation-in-the-field-of-small-business-of-the-people-s-republic-of-china .
The article offers an analysis of the current state of the legislation on value added taxation in relation to small businesses in China. The peculiarities of the formation of legal structures of VAT, developed in order to stimulate small enterprises, are highlighted. It is noted that in the context of declining economic growth and the spread of new viral pneumonia, the legislator and the tax authorities of the People's Republic of China provide a wide range of additional benefits in the legal mechanism of VAT for this category of taxpayers.
Keywords: the mechanism of legal regulation of VAT, tax benefits, tax deduction, VAT refund, small business.
Instead of relying entirely on a tax policy to support investments, the Chinese leadership is focusing its efforts towards institution-building <1>, developed on the basis of lifting a significant part of the Chinese population out of poverty and fully encouraging the growth of household disposable incomes <2>.
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<1> Shahid Yu. The economics of development through the decades. A critical look at 30 years of preparation of World Development Reports. M., 2012. p. 70.
<2> Spence M. The next convergence: the future of economic growth in a world living at different speeds. M., 2013. p. 241.
The Chinese leadership is taking the first steps in this direction in rural areas, taking advantage of the fact that side employment in the manufacture of various goods is traditionally a common practice, which is also adopted by collective farms.
After Deng Xiaoping's reforms began in 1978, local party leaders began to promote the creation of township-township enterprises (PVP), which gradually filled the shortage of goods in the consumer market. The active development of PVP is facilitated by the low cost of attracting labor resources and minimal capital investments within the framework of those technologies that allow them to successfully compete in the commodity markets for a long time. In the period 1978 - 1996, employment in the PVP increased from 28 to 135 million people. The share of the created product of these organizations in the GDP of the People's Republic of China increases from 6% to 26% <3>.
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<3> Allen R. Global Economic History: A Brief introduction. M., 2013. p. 209.
By 2004, 75% of toys, 29% of mobile phones and 58% of clothing in the world were produced in China <4> on a production base developed in conditions of maintaining minimal financial and economic costs and tax incentives for economic entities.
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<4> Shapiro R. Forecast for the future. M., 2009. p. 235.
For the purposes of economic development, the entire system of taxation of small businesses is being actively modernized. A number of measures are being taken for this group of taxpayers in the field of VAT legal regulation, the most important of which is the abolition of the multiple range of VAT rates from July 1, 2014 (6%, 4%, 3%) and the transition of this group of tax payers to a single unified rate of 3%.
This step is a fairly clear illustration of how fundamental the issue of mass entrepreneurship is in the context of the development of the tax and welfare state <5> in the PRC.
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<5> Piketty T. Capital in the XXI century. M., 2015. p. 493.
Implementing the decisions of the CPC Central Committee and the State Council of the People's Republic of China on innovation support aimed at promoting preferences for entrepreneurship, the State Tax Administration of the People's Republic of China in April 2017 adopted a special Guide on preferential taxation policy for mass entrepreneurship and innovation, which includes 89 preferential tax policies and measures in key areas of the economy. The proposed measures cover the entire life cycle of the enterprise and contain a description of preferential positions. In particular, these include a large-scale exemption from VAT for taxpayers by increasing the VAT threshold from 30,000 yuan to 100,000 yuan of monthly sales <6>.
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<6> Regulation of the State Tax Administration of the People's Republic of China on the collection and management of small taxpayers exempt from the value added tax policy: Announcement of the State Administration for Value Added Taxation No. 4 dated March 1, 2019
It is significant that the most important component of the implementation of the decisions of the XIX Congress of the CPC in the field of taxation is the definition of one hundred and ten preferential policies to help combat poverty, of which thirty-six directions involve specific measures to reduce or completely eliminate VAT.
The correction of the legal mechanism of VAT has been carried out in such a way as to cover almost all problem areas affecting the way out of poverty (infrastructure, employment, support for small and associated agricultural producers): construction of infrastructure in poor areas; ensuring the safety of drinking water; ensuring conditions for the sale of agricultural products of own production; transfer of land to agricultural producers for agricultural production; promotion of inclusive financing of agricultural producers; encouraging social donations to fight poverty.
In particular, this is reflected in the definition of the following specific measures <7>:
exemption from VAT of fees for the maintenance of rural power grids (2);
exemption from VAT of projects in rural areas to ensure the safety of drinking water (11);
VAT exemption for the transfer of land use rights to agricultural enterprises exempt from value added tax (16);
exemption from VAT on the contractual transfer of land to agricultural producers for agricultural production (17);
VAT exemption for the sale of agricultural products of own production (23);
VAT exemption for imports of corn bran, rice bran and other feed (25);
VAT exemption for bulk feed in domestic turnover (26);
VAT exemption for the production and sale of organic fertilizers (27);
VAT exemption for drip irrigation products (28);
VAT exemption for the production and sale of agricultural film (29);
VAT exemption for wholesale and retail sales of seeds, seedlings, pesticides, agricultural machinery (30);
recognition of the right to deduct input VAT (32);
VAT exemption of the "company + farmers" business model for the sale of livestock and poultry (39);
VAT exemption for sales of agricultural products by professional farmers' cooperatives (41);
VAT exemption for sales of agricultural materials by professional farmers' cooperatives (42);
VAT exemption for vegetables (45);
VAT exemption for the turnover of some live meat and egg products (46);
full (100%) VAT refund for the production of fuel and electricity from agricultural and forest residues as raw materials (50);
70% VAT refund in the integrated use of excess raw materials of agricultural and forest products for the production of resources (51);
70% VAT refund for the production of biodiesel from animal and vegetable oil waste (52);
50% VAT exemption for the production of pulp and paper from straw raw materials (53);
allocation of sales quotas to exempt small taxpayers from VAT (57);
exemption of small taxpayers, together with VAT, from "six local taxes and fees" (59);
VAT exemption for persons with disabilities (63);
VAT refund for households engaged in employment of persons with disabilities (64);
VAT refund to special education enterprises working in schools for the employment of persons with disabilities (65);
VAT exemption of interest income of financial institutions on loans to farmers (69);
VAT exemption of interest income of financial institutions for micro-crediting of small and microenterprises, individual industrial and commercial households (70);
enabling the use of simple VAT methods in the provision of financial services by rural credit cooperatives (73);
enabling the application of the simple VAT method to interest income on loans from the Chinese Financial Bank of Sannong related to agriculture (75);
VAT exemption of interest income on loans from a micro-credit company to farm households (77);
VAT exemption for financing guarantees for farm households, small and microenterprises, as well as re-guaranteeing businesses (80);
insurance of agricultural and livestock businesses is exempt from value added tax (82);
preferential VAT taxation policy for ethnic and economically weak areas of Xinjiang (Xinjiang International Grand Bazaar) (93);
VAT exemption for charitable foreign donations (108);
VAT exemption of goods for poverty reduction (110).
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<7> The numbering from the general list of tax policies is marked in parentheses.
At the same time, the Chinese leadership is working to expand the range of incentive measures, continuing to initiate "targeted" incentives for the development of agriculture and support for the poorest part of the population. These include the announcement dated August 28, 2019, No. 83 <8>, the first paragraph of which establishes VAT exemption for tea production enterprises selling their own tea, as well as sales of tea by distribution companies.
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<8> Announcement of the Ministry of Finance of the People's Republic of China and the State Tax Administration of the People's Republic of China dated August 28, 2019 No. 83 "On the continuation of the implementation of the value-added tax policy.