China's turnover taxation in the pre-VAT period: 1949–93

Abstract

The current pilot reform in China based on the merger of the business tax applied to the supply of services and the value added tax (VAT) on the supply of goods has attracted considerable attention abroad. Much discussion has focused on the details of tax rules and policies behind the pilot reform in certain parts of China, with little apparent recognition of the fact that turnover taxation had been imposed in China for decades before the VAT was formally adopted during the 1994 tax reform. This article examines the historical development of turnover taxation in China in the pre-VAT period, that is, from 1949 to 1993, to explore the background that helped shape the current VAT reform.