Premier Li Keqiang urged comprehensive implementation of replacing the business tax with a value-added tax (VAT) to promote structural reform while meeting with provincial, municipal and autonomous region leaders on April 11.

The Premier said replacing the business tax with VAT is an important part of structural reform, especially supply-side reform, and the greatest tax reduction measure in recent years. It can greatly slash enterprises’ burden and promote enterprises’ investment in research and development, thus creating a favorable environment for the development of a modern service industry and small- and micro-sized enterprises.

He added that the plan can also resolve the long-lasting issue of double taxation in China by regulating and unifying the tax system, which can provide strong support for economic operation and provide sustainable momentum for economic development in the future.

Local authorities should seize the policy opportunity of comprehensively implementing the replacement of business tax with VAT and large-scale structural tax reduction, focusing on economic transformation and upgrade, fully stimulating the initiative of enterprises in all sectors, and expanding effective investment in equipment replacement and technical renovation, said the Premier.

Meanwhile, Premier Li stressed that difficulties should be resolved through innovation with the development of competitive industries to suit local conditions, the cultivation of new growth drivers and upgrading of traditional growth drivers, as well as the expansion of the new economy, in a bid to increase economic growth and improve the quality and efficiency of economic growth.

The Premier also warned against unreasonable administrative intervention, saying that the act of preventing cross-regional business or asking businesses to buy local products must be limited because it might lead to local protectionism and market segmentation and fight for tax revenue sources by various devious means and impede the formation of an integrated national market.

The move to launch backward and excessive capacity projects for the sake of short term or partial benefits must be prevented, as it would further weaken the effects of structural reform, said the Premier.

Replacing the business tax with VAT is a common responsibility for the central and local governments, added the Premier.

“We must approach this issue from a long-term and overall perspective, consider the benefits of various parties, and solve the problem of the proportion of VAT revenue divided between the central and local governments and jointly implement the reform details by overcoming various difficulties,” said the Premier.

The Premier urged local government leaders and related finance and tax departments to promote the reform and positively resolve problems in reform and ensure the reduction of tax burdens on all industries.

He also called for intensified publicity and explanations and timely responses to social concerns concerning the tax reform.