Introduction Of Taxation System In China

Introduction of taxes in China Name Institutional Affiliation Taxes are the obligatory financial charges imposed on individuals or organizations in a country, essential for financing governments all over the world (Brean, 2013). In China, the development of the taxation system serves as the primary source of revenue for the Chinese government. The China tax system came about through various stages of tax reforms from 1940 to the present day. The process of developing working taxation reforms brought about different forms of taxes in China, implemented through different ratios to achieve various objectives. The State Administration of Taxation of China outlines that China’s tax framework has undergone numerous adjustments and improvements throughout the twenty-first century, leading to the establishment of eighteen forms of taxes grouped in various categories (State Administration of Taxation of The People’s Republic of China, 2015). The first group is income taxes comprising of corporate income tax and individual income tax. According to the China Business Support Organization, individual income tax is the levy imposed on the income of Chinese citizens and non-Chinese citizens who have resided in China for one year or more (China Business Support Organization, 2009). The salaries these individuals earn are subjected to a tax ratio of 5 percent to 45 percent. The corporate income tax, on the other hand, applies to business enterprises located in China. Enterprises owned by Chinese citizens incur a 25 percent tax cut while enterprises run by foreign citizens incur a 20 to 25 percent (China Business Support Organization, 2009). The second group of taxes is the goods and services taxes (State Administration of Taxation of The People’s Republic of China, 2015). The value-added levy refers to taxation instituted on the retailing of goods and provision of services such as processing, repairing, and installation within the Chinese territory. The goods and services attract tax ratios of 17 percent on the sale of various goods and services, 13 percent on goods utilized every day and 11 percent on transportation. The excise tax is the levies imposed on the production and processing of products such as consumer goods, cosmetics or refined oil products in China. Such activities attract valorem tax or per unit tax or in some instance both. Business tax is the levy obligated to businesses or individuals who provide taxable services, transferring of assets and selling immovable property such as real estate services. The tax ratio for such services differs with the industry whereby; the entertainment industry incurs 5-20 percent taxes, while other sectors incur 3 or 5 percent tax. The vehicle purchase tax is the levy accrued when purchasing cars, motorcycles, trailers and agricultural vehicles, which incur a tax ratio of 10 percent (State Administration of Taxatio...