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When will VAT be reduced? What is the adjusted VAT rate

According to the latest news of VAT adjustment, China's VAT rate reduction policy will be officially implemented on April 1. At present, some auto manufacturers have announced to reduce the retail price of their models and joined the price reduction camp. So, what is the adjusted VAT rate? Let's have a look.

In this year's government work report, it is clear that we will deepen the reform of value-added tax, reduce the current 16% tax rate in manufacturing and other industries to 13%, and the current 10% tax rate in transportation, construction and other industries to 9%, so as to ensure that the tax burden of major industries will be significantly reduced. At present, the 16% tax rate is applicable to the wholesale and retail businesses, except the manufacturing industry. In addition to transportation, construction, real estate, telecommunications, postal and other industries, 10% of them are suitable.

As an indirect tax, value added tax is added to all kinds of goods and services. Assuming that the price of a mobile phone (including tax price) is 4000 yuan, under the background of the current value-added tax of 16%, it means that the price of a mobile phone is 3448 yuan and the value-added tax is 552 yuan. If the pricing strategy of the mobile phone manufacturer is price tax separation, and the VAT rate is reduced from 16% to 13%, the price of the mobile phone will still be 3448 yuan, the VAT will be reduced to 448 yuan, and the overall price will be reduced to 3896 yuan, and the corresponding 'price reduction' will be 104 yuan.

Fan Ziying, a professor at the school of public administration of Shanghai University of Finance and economics, said that the price of products or services will decline, but the price reduction is unlikely to reach 16% to 13%, and many tax cuts will be consumed in the middle of the industrial chain. In the end, consumers will get limited price reduction, and the corresponding corporate profits will rise. After that, employees will be directly or indirectly invested in related fields, such as R & D.

It is worth mentioning that with the announcement of the reduction of VAT rate, Mercedes Benz, BMW and others have also responded to the official reduction. Some analysts believe that from the reaction of the VAT cut in 2018, such as Porsche and Lincoln, the VAT cut will trigger a new wave of 'price reduction' for a large number of car companies, and many consumers will buy their favorite car at a lower price.