British VAT and UK VAT Reforms

Document Type:Thesis

Subject Area:Accounting

Document 1

The VAT reforms have been part of this effort designed to shift the economy of China from one that is driven by labor intensive manufacture to one that is service-oriented (Cui, 2014). The shift would be carried out by easing the burden of tax in the service industries. In the United Kingdom (UK), VAT was introduced in 1973 when the country became part of the EU (European Union). VAT is currently the third largest source of revenue for the government after income tax and National Insurance (Greenhalgh, Muldoon-Smith & Angus, 2016). The principle forming the basis of UK VAT is that it needs to be applied at every phase of during the process of production and distribution. Research Questions and Objectives The research question is: What are the achievements of the Chinese VAT reform policy as well as British VAT? The research objectives are as stated below 1.

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To explain the Chinese VAT reform and British VAT condition 2. To analyze the influence of Chinese VAT policy reform and British VAT in the two countries as well as the global economy 3. To compare the difference between the VAT in China and the UK and the advantages and disadvantages 4. To find out the importance of the Chinese VAT reform system and UK VAT in general Outline This research proposal will be written in a sequential order while tackling all the essential elements of a proposal. On the same note, VAT would have encouraged the manufacturers to invest in research and development for them to advance in the value chain. Since 1979 when China had bold reforms while also opening up to the global economy, the country had a VAT system put in place (Bjertnæs, Fæhn & Aasness, 2008).

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In 1994, the tax system went through an overhaul given the fact that the VAT was expanding to encompass processing, sales of goods and repair services. The overhaul also had an aim of directing increased revenue to the central government (Gao, 2018). The latest phase seen in the VAT reforms were initially introduced as a pilot project in 2012 in Shanghai which had the objective of incorporating industries before expanding them to other regions in the same year. However, the use of VAT is also associated with certain inefficiencies brought about by certain rules and mechanisms implemented when using the system (OECD, 2011). Thus, in China, there were depth assessment of efficiency gains associated with VAT before the implementation of the tax reforms. Conceptual Framework of the VAT Reforms The shift from BT to VAT causes changes in consumer prices in three conceptual analogies (Mellor, 2017).

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First, from the EC analysis of VAT, an increase or decrease in a VAT is directly passed to consumer and depends on the structure of the market of the product that tax is imposed (Du, 2015). In a market that is competitive when it comes to particular goods or services, the VAT depends on the sensitivity of the prices when it comes to the consumers and producers (Webley, Adams, & Elffers, 2002). Any increase in the rate of tax applied economically to sales made to consumers is associated with having a lump-sum tax at ago to the business assets used in the production of sales (Cui, 2014). The effect is efficient in businesses as it applies set of assets that are already in existence and consequently does not lead to behavioral distortions that are tax-induced.

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The Inefficiencies in the VAT Problems in tax administration are connected to some of the inefficiencies in China's VAT applied to traditional sectors as well as new pilot ones (Gao, 2018). There are different variety of ways through which the Chinese VAT fails to eliminate burden linked to business purchases. The VAT system in China has a very large array of exemptions from tax as a suggested preference when it comes to payment of tax (Zhou, 2016). The rates increased to 17. 5% in 1991with the aim of increasing revenue. The organization of VAT once changed again between 1997 and 2007 with some products being charged for as low as 5%. On the contrary, in 2011, the rates of VAT went up to 20% which reflected the tendency of the state to raise indirect taxation, rather than direct ones (Geoghegan, 2015).

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In the present day, there have not only been changes in the percentage for VAT, but also, the VAT handbook has become increasingly detailed as it takes account of the eligible goods and services for VAT. This is a factor that can cause issues in the cash flow for those forms that provide large amounts of credit for trade (Fouquet, 1995). Small businesses, on the other hand, have the option of choosing to calculate VAT on the basis of cash. UK VAT and Brexit Brexit refers to the potential or hypothetical departure of the UK from the EU and is associated with certain direct impacts to the tax system in the UK, specifically VAT (Hansford. , Hasseldinev& Howorth, 2003). The VAT system in the UK only operates within those parameters set across by the directives of the EU VAT, which is a system that only applies to member States of EU.

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Therefore, the products and services tend to appear more expensive to those businesses not registered to VAT and the customers of the given corporation (Greenhalgh, Muldoon-Smith & Angus, 2016). The company is hence likely to be unwelcome in the marketplace. Another limitation associated with the use of VAT is the fact that it requires the corporations to submit VAT returns on a quarterly basis. As a result, it makes it unavoidable for the business to maintain and keep VAT invoices and receipts (Hansford, Hasseldine & Howorth, 2003). Conclusion In conclusion, the VAT is essential when it comes to tax payment in UK and China. The interviews will be carried out through the use of depth open-ended questionnaires. The secondary sources of data used will be retrieved from the internet searches online.

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The study will use specific words for gathering data. The inclusion criteria will involve those sources that are less than 10years old. Hence those documents published earlier than 2008 will be excluded. Data Collection/ Procedure The in-depth interviews will be conducted within the organizations on any vacant room such as the boardroom. The researchers will ask the participants questions which they will afterward write down. The researchers will also jot down their observations of the participants in terms of behavior, body language, facial expression, and level of comfort. The researchers will also seek clarifications and ask questions where necessary. Potential Significance This study will lead to the development of detailed project reports which will provide detailed information regarding VAT in the UK as well as China’s VAT reforms and their importance to the local and global economies.

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In the UK, the requirements for regulation tend to be a burden and can hence even be a hindrance when it comes to growth and development of SME. The UK tax regulations categorize the cost of complying with the regulations of VAT into total and core costs. Core costs are necessary, and hence have to be complied with while total costs include one-off costs and VAT planning. \ REFERENCES Bjertnæs, G. H. Energy Economics, 17(3), 237-247 Gao, P. China's 40 Years of fiscal and tax reform: A basic trajectory. China and World Economy, 26(2), 94-106 Geoghegan, J. Retail groups call on George Osborne to review business rates. Greenhalgh, P. Johnson, P. & Conway, C. How Good Are the U. K. VAT Registration Data at Measuring Firm Births? Small Business Economics, 9(5), 403-409 Keen, M.

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