The government work report proposes to introduce structural tax reduction, thoroughly carry out and optimize tax preferential policies that support the development of small-, micro-sized, and individually-owned business, and to establish, and to carry out pilot projects to replace business tax with VAT.

On January 1 this year, Shanghai launched the first pilot project in China to replace business tax with VAT. On March 7, tax reform became the center of debate during the group meeting of the second team of the Shanghai delegation.

"I very much agree with structural tax reduction", said Guo Guangchang, a deputy to the National People's Congress and chairperson of the board of Shanghai Fosun Hi-tech Group Co., Ltd., "The government work report proposes to deepen reform of the fiscal, taxation and financial systems. The hope is that structural tax reduction could be carried out further".

The deputies believe that Shanghai's pilot project of replacing business tax with VAT is a specific measure of structural tax reduction. Chen Xuyuan, a deputy to the NPC and chairperson of the board of Shanghai International Port (Group), said that: "For enterprises, replacing business tax with VAT doesn't necessarily mean tax reduction. Tax is increased in some cases and reduced in others. Take us as an example: some of our subsidiaries now pay more tax while others pay less".

Of the 120,000 companies of the seven industries that are included in the first group of enterprises of the pilot project in Shanghai, 80,000 are small-scale taxpayers, and their tax burdens are reduced; the other 40,000 are general taxpayers, of whom companies of the transportation industry and financial leasing industry see their tax burdens increased. For this reason, Shanghai has promulgated a financial support policy that reduces the tax increment of these enterprises by virtue of financial reimbursement. It is estimated that this round of taxation system reform will result in a static tax reduction of RMB 10 billion Yuan in Shanghai.

The deputies also put forwards some advices for the reform of the fiscal and taxation systems. Zhu Yuchen, a deputy to the NPC and managing director of China Financial Futures Exchange, appeals for implementation of large-scale structural tax reduction. Zhu says that the taxation cost of small- and micro-sized businesses is particularly high; tax reduction would have the upmost direct influence on supporting medium- and small-sized companies and weak areas.

Zhang Zhe, a deputy to the NPC and deputy secretary-general of Shanghai Municipal Committee of CPPCC, believes that the present financial taxation policies need to be organized. He suggests that relevant agencies should go to local communities to get a clear picture of the effect of the implementation of the policies. Outdated rules and universal policies that do not suit local conditions should be sorted out, so as to promote economic structural adjustment. "For example, the standard of contribution fee and its taxation standard haven't been changed for years. At present, contribution fee is low but tax is high".

Chen Xuyuan suggests that some special funds and special expenditures should also be straightened out so as to mitigate enterprises' burden. "For example, the standard of port construction charge and port dues on vessels were established 3 or 4 decades ago. Back then, port construction was not advanced, and the purpose of the charge was to promote the development of port construction. Now that these ports have been in operation for so many years, should the charge still be collected, and how to use this money once it is collected? These are questions that need to be studied and adjusted in a transparent manner".

Nonetheless, the deputies don't suggest absolute tax reduction. They believe that tax adjustment should be carried out in accordance with actual conditions. There should be reduction as well as increment, so as to guide enterprises to adjust industrial structure and transform development pattern.

Zhang Quan, a deputy to the NPC and director of Shanghai Environmental Protection Bureau, suggests increasing resource environment tax and energy tax. "Currently, resources exploitation in some localities is in a mess. Low environment cost results in low recycle rate, huge waste, and excessive pollution in the operation of many resources exploitation enterprises. Sustainable exploitation can't be achieved. Adjustment of the tax system should be made so as to force enterprises focus their efforts on rational exploitation and use of resources".

Wang Xia, a deputy to the NPC and vice president of Shanghai Huayi (Group) Company, agrees with Zhang Quan's suggestion. Wang also points that: "The increased resource tax should be used to compensate the resource land. This can mitigate the impulse to exploit resources irrationally in these localities".

Amidst heated discussion, thoughts about deepening the reform of the fiscal, taxation, and financial systems are in progress.