On the Treatment of Agricultural Products in VAT Legislation
An ideal VAT system should cover all goods and services. However,based on the principle of equity and the need to mitigate the regressivity of VAT,how to impose VAT on agricultural products has become a classic technical challenge in the design of VAT laws. As the cradle of VAT,the European Union (EU),at the beginning of the harmonisation of VAT systems,established the treatment of agricultural products as exempted and compensated at a flat rate. Later,with the continuous development of the VAT system,many countries tried to fully include agricultural products into the scope of VAT. As a large agricultural country,China's VAT rules on agricultural products show the dilemmas of unclear definition of tax exemption,unreasonable VAT credit for agricultural products and ineffective tax incentives. The treatment rules of agricultural products in the VAT law should follow the basic concepts of tax neutrality and tax equity. For this reason,China's VAT law should further clarify the definition of tax exemption elements for agricultural products,improve the mechanism of agricultural products' deduction,and further improve the tax preferential policies for agricultural products.
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维普
