After the reformation and the opening up in 1978, China formally introduced the VAT (Value Added Tax) system since 1979 and has kept reforming on it. Until now, VAT has become the largest tax categories in China.
There are numerous small enterprises. Their productive value holds about 60% of GDP every year and total tax holds over 50% of the whole country. In addition, 80% of the urban and rural employment needs has been met by them. However, the tax of most of the small enterprises is still heavy. To release the heavy tax, China has adopted a small-scale taxpayer system.
South Korea has implemented the VAT system since 1977. And through more than 40 years of exploration and practice, South Korea has developed into one of the countries which has world's most completed VAT system. Just like China, to release the tax of small-scale enterprises which are under certain production scale, South Korea also operated simple tax system which has some reference significance for the small-scale taxpayer system in China.
Although both China and South Korea has introduced the system, there also exists many differences in the actual content of VAT system of two countries. This paper firstly introduces the VAT system of South Korea, the current situation of VAT system, the small-scale taxpayer system of VAT and the small-scale taxpayer system. And then we compare the way of taxation, the charge rate and tax statement of the simple tax system (the small-scale taxpayer system) between China and South Korea. According to the results, we propose the problems and improvement plans for small-scale taxpayer system of China.
In terms of the taxation methods of two countries, the adequate preparation for the conduction of VAT is the main reason why taxation of South Korea is more advanced, while the taxation methods of China are greatly affected by the objective environment which cannot be fully cross-audited, and it is difficult for tax authorities to strictly supervise the taxation of value-added tax.
Generally, the tax rate of small-scale taxpayers in China is 3%, while the tax rate of ordinary taxpayers is 13%. Although it seems that the tax rate of small-scale taxpayers is lower, the actual tax burden of small-scale taxpayers is higher than that of ordinary taxpayers because small-scale taxpayers cannot deduct input tax. To solve this problem, firstly, the rate of small-scale taxpayers should be reduced and the tax threshold of small-scale taxpayers should be increased. In addition, the VAT rate structure should also be improved.
Small-scale taxpayers cannot offset the input tax in China, as well as using the special VAT invoices. When the ordinary taxpayers purchase the goods od small-scale taxpayers, their tax burden is significantly increased when compared with the deduction invoice of 13% tax rate obtained from other general taxpayer. At the same time, the small-scale taxpayers are not allowed to deduct input tax which is added to the cost and finally lead to more cost than ordinary taxpayer. In order to deal with the problem, the restrictions on issuing special VAT invoices should be relaxed. In addition, to prevent the abuse of special invoices by small-scale enterprises, the existing anti-forgery tax control system should be full used to bring small-scale production and wholesale enterprises in so as to solve the problem at the source.
At last, in terms of the phenomenon that the whole accounting level of small-scale taxpayers is not high, the professional skill education of the accounting personnel in small-scale enterprises should be enhanced.