What is the value-added tax cut to affect corporate profits?
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Stories - March 9, 2019

What is the value-added tax cut to affect corporate profits?

1, the value-added tax is the largest tax in China
China’s tax revenue accounts for more than 17 years is still as high as 84%. The value-added tax is the largest tax in China tax structure in 17 years, China’s value-added tax revenue accounted for the proportion of tax revenue of nearly four.
2, value-added tax only for value-added tax is a kind of foreign tax, turnover tax, the main point is to discuss influence of tax price change.
The value-added tax only on the value added is a foreign tax, turnover tax, step by step in the production and sales in the transfer, ultimately borne by consumers. So the VAT does not directly affect the enterprise profit in the income and cost index, the value-added tax cut on the profit effect depends on the bargaining power of enterprises.
Change the sale price in 4 ways:

  1. The purchase prices were unchanged (bargaining power balance);
  2. The purchase price decline, selling price unchanged (the strongest bargaining power, to maximize tax revenue);
  3. The purchase price unchanged, price decline (the weakest bargaining power, will not benefit even damaged);
  4. The purchase price decreased (the whole industry chain to share tax revenue).

3, China’s value-added tax rate of 16%, 10%, 6% third
The new VAT regulations most of the manufacturing for the 16% tax rate, shipping, construction, infrastructure, agricultural products, real estate leasing tax rate is 10%, while the financial, information technology and other modern service industry rate of 6%.
4, most people think is a good way to change
The purchase price decline, selling price unchanged, the enterprise income tax is exclusive, downstream enterprises do not enjoy, upstream enterprises should also reduced tax profits to let out, this is very good for the enterprise.
For instance:
The purchase price of 116 yuan (100 yuan cost +16 yuan VAT) thing, I processed to sell 232 yuan (200 yuan income +32 yuan value-added tax), now rate from 16% to 13%, the purchase price is 113 yuan (100 yuan +13 yuan cost of VAT), selling price is 226 yuan (200 yuan income +26 yuan of value-added tax).
The price you must decline, I now becomes the purchase price of 113 yuan, is not no change on the upstream business, because the upstream enterprise price, reducing taxes are the enterprises earned. Of course, the biggest change is likely to stimulate sales, because the price is cheap, this is good.
The company can also sell price of downstream enterprises 232 yuan,  232-226=6 Yuan then the difference is to earn profits? 6/200=3%, 3% can enhance the net profit rate.Of course, different enterprises are not the same, for example, here is a 50% gross margin business (100/200=50%). Impact on corporate profits is very obvious.
5, but more time may be the 4 case
The sale price declined slightly (the whole industry chain; the income tax sharing) benefit equally, to everybody below the example analysis, may affect the profit will be reduced.
For instance:
The original purchase price of 116 yuan, is now likely to become (116+113) /2=114.5 yuan, the actual price is now down to 113 yuan after tax upstream enterprises (100+13), but the enterprise bargaining power is not so strong, only let the upstream upstream bring the price down to 114.5 yuan, you can enjoy the preferential tax.
The price from 232 yuan to /2=229 yuan (232+226). The actual drop you after tax price of 226 yuan, but you also need to make some tax breaks, not all downstream to earn, sell 229 yuan (each earn half of tax benefits), also let the downstream sales profit increase.
Then the 1.5 element (114.5-113=1.5) is that you spend the purchase price, calculate the cost of 101.5 yuan; 3 yuan (229-226=3) is to generate income, income 203 yuan, the gross profit 203-101.5=101.5 yuan, than the original gross profit 100 yuan (200-100=100) more than 1.5 yuan,  net the profit rate may increase 1.5/200=0.75%, just 4 less than a lot of it, but this may be normal.
The other 2 kinds of conditions, interested friends can see in example by analogy.
6, the more favorable what industry?
From the tax point of view, the most positive affirmation is now manufacturing industry there is a tax rate of 16%, value-added tax is the tax, the wholesale and retail trade industry revenue is also very obvious.
Simply say so much, the tax reduction raise a Babel of criticism of many people, but do not know how to affect the enterprise, hope that this simple analysis can let more people see on this is not confused.

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