Looking back on the fiscal reform in 2016, the comprehensive implementation of the pilot project of "replacing the business tax with a value-added tax" is a landmark event. Different from other taxes, value-added tax is a kind of tax designed based on theory, and its tax base is not intuitive. In international practice, value-added tax is diverse. The diversity is mainly manifested in three aspects.First, the deductible ranges are different, which lead to the difference of tax base.Second, the collection methods are different.Third, the scopes of industries covered are different.The diversity in practice makes it difficult to define the modern value-added tax system. The essential characteristics of the so-called modern value-added tax system can be summed up in three points: first, it uses the method of deduction in tax management to avoid double taxation; second, its tax base is wide, that means, it covers all the industries as far as possible; third, it is an indirect tax with the production and sales of goods as the tax object.Special attention needs to be paid to the distorting effects of economic development when business tax is applied in service industry and value-added tax is applied in manufacturing industry respectively. "Replacing the business tax with a value-added tax" also established the principle of "only reducing but not increasing" for all industries. This is the embodiment of the more positive fiscal policy. Tax reduction is only a part of the dividend of the reform of “replacing the business tax with a value-added tax”. More importantly, it can reduce the distortion in economic operation and improve economic efficiency.Areas that need improvement: how to simplify the tax rates of multiple tax classes, how to improve the value-added tax system of some specific industries and whether the function of value-added tax can be expanded.
