Research on the Replacement Business Tax with ValueAdded Tax of Chinese Banking Industry


  • Zhaohui Long
  • Mengwei Cai
  • Ke Zhang


As the heart of China’s financial system, the banking industry plays an important role in the nation’s economic development. Under Chinese current financial tax system, the main taxes levied to Banks are business tax (BT) and income tax. Shouldering heavy tax burden and being taxed repeatedly, such policies on the Chinese banking industry undermines the integrity of Value-Added Tax (VAT) chain, contrary to the international guiding rule that the financial industry should be lighter taxed. The defect of Chinese financial tax system makes the phenomenon that the capital accumulation rate is lower than business expansion rate. As a result, Chinese banking industry lack a foundation for further development and international competitiveness. This paper, using developed countries’ successful experiences in financial tax system for reference, in combination with China's practices, proposes to include the banks into the levying scale of VAT, handling local and central income distribution properly to consummate Chinese financial tax system reform in replacing the business tax with VAT